NE – Noble Corp. – Options investors established bullish positions on the provider of offshore contract drilling services this morning despite the 6.35% decline in the price of the underlying shares to $28.16. Noble’s shares fell sharply following President Barack Obama’s announcement on Thursday there is to be a six month moratorium on new offshore drilling. Contrarian players took advantage of richer put premium available today by selling short roughly 2,700 put options at the December $22.5 strike to take in an average premium of $1.475 per contract. Put sellers keep the full premium received as long as Noble’s shares exceed $22.50 through expiration day in December. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an average price of $21.025 apiece should the put options land in-the-money at expiration. Shares must plummet 20% from the current price of $28.16 to dip beneath the $22.50 strike price, and must decline roughly 25.33% from the current price before put sellers face losses beneath the breakeven price of $21.025.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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