Oil and gas exploration and production company Hess Corporation (HES), is up 9% over the past year. That’s far lagged the overall stock market. One trader is betting on a potential decline into next year.
That’s based on the January 2025 $145 puts. With 219 days until expiration, 7,250 contracts traded compared to a prior open interest of 153, for a 47-fold rise in volume on the trade. The buyer of the puts paid $10.20 to make the bearish bet.
Hess shares recently traded for about $147.50, making this trade about $2.50 out-of-the-money.
More interestingly, Chevron (CVX) has been looking to buy Hess since last October, and shareholders approved the deal in May.
However, there have been some regulatory issues raised. If the merger is called off, Hess shares could see a drop lower. Shares are now midway between their 52-week range of $129.12 and $167.75.
Action to take: Investors who think the deal won’t go through may not want to own Hess shares yet, as there could be some more downside ahead. Those who think the merger will go through could buy shares now, with the expectation of owning Chevron shares in the coming months.
For traders, the January $145 puts are well positioned for a drop in Hess shares. If the deal doesn’t go through, the options could see a big win. If the deal does go through, the options stand the chance of expiring worthless.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.