Canadian energy producer
Cenovus Energy (CVE) has been making higher highs since May, but recently started to break lower. One trader is betting on further downside for shares in the coming weeks.
That’s based on the December 15 $19 puts. With 45 days until expiration, 10,908 contracts traded compared to a prior open interest of 435, for a 25-fold rise in volume on the trade. The buyer of the puts paid $0.85 to make the bearish bet.
Shares recently went for about $19.30, so the trade in an at-the-money one. Cenovus has been trending toward is old 52-week high of $22.18, but has been pulling back in recent sessions.
With the recent drop, the oil and gas producer is flat over the past year. Earnings are down by nearly two-thirds from last year, but rising energy prices may lead to further improvements in their operations soon.
At current prices, Cenovus trades at just 7 times earnings, so rising energy prices should bode well for shares.
Action to take: Investors may like shares at $19 or under, where the stock yields 2.1 percent.
For traders, the short-term trend is down, but the long-term trend is up. So be nimble with the December puts, and look to take a quick profit—which can then be used to trade a rally on the long side.
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 of the companies mentioned in this article.