An Oil Giant Giant Trade

Hey Traders,

Right now, I’m keeping a close eye on any noteworthy commodity trades I see cross the tape …

In times of inflation, commodities tend to outperform, so I definitely want to know about any Smart Money moves being made right now.

On Monday, I noticed a particular Big Money play on a big oil name that will soon be getting a little bit of a makeover …

Here’s what I saw.

A Shell Of Its Former Self

On Monday, oil giant Royal Dutch Shell (Ticker: RDS) announced plans to move its headquarters to Britain and, perhaps fittingly, drop the “Royal Dutch” from its name, becoming just “Shell Plc.”

This was positively received by investors for several reasons. For one, it will simplify the RDS share structure, which is currently split into RDS.A shares – which means they are sourced from the Netherlands, and subject to dividend taxes – and RDS.B. shares, which are British and not subject to the same tax burdens.

RDS explained that these moves would help the company reduce its carbon footprint more quickly while improving value for shareholders. 

When you put it that way, it kind of sounds like a win-win!

And the market seemed to like the news, with the shares gaining 1.8% during Monday’s trading session, and adding an additional 0.9% during Tuesday’s market hours, closing at $45.66.

Chart courtesy StockCharts

However, even with this week’s gains, the shares are still well off their late-October peak at $49.91.

One Smart Money trader in particular seemed especially keen on the news and name-change – at least in the near-term.

On Monday, this trader purchased 5,963 contracts of the December 45-strike calls for $1.40. 

This straight-up call buy required an outlay of $834,820 – a very bullish play, and definitely something worth noting.

RDS.B options have especially low volatility being factored in right now, suggesting that this trader got something of a bargain.

And even better, 20-day and 30-day historical volatility is currently outpacing implied volatility – so options traders have been getting more movement than they paid for!

The RDS.B pits, however, are rather low volume, so liquidity could be a concern if this trader wants to close out early, and in one fell swoop.

The average daily volume in RDS.B pits is a palty 3,784, and it usually skews to the call side.

On Tuesday, RDS.B saw 3,325 calls cross the tape – 130% of its average daily volume!

So a chunk of 5,963 contracts is definitely worth noting …

Open interest is also especially high right now, with 171,845 contracts open (typically 1.7 calls to every put), compared to the typical 150,723 (with a typical 1.6 calls to every put). 

Calls in particular are at 116% of their average open interest, suggesting slightly more bullish sentiment than usual in the RDS.B pits …

In particular, the November 45-strike call has the highest open interest of any contract, with 9,764 calls currently open.

The December 45-strike call has the second highest open interest, with 7,789 contracts outstanding …

Meaning this single trade accounts for 77% of the second highest open interest contract.

That’s why this trade – although not the highest dollar trade, at just shy of a million dollars – is exceptionally noteworthy.

I’m also keeping an especially close eye on any noteworthy commodities trades as of late …

Commodities tend to outperform in times of inflation …

And, well, we’re definitely seeing some inflation.

That’s how our Head Income Trader Bill Griffo has managed to see such insane returns over the last few months while test-driving his Power Income Trader program.

He’ll be going live in a special event on Thursday to give an update on critical inflation news … be sure to keep an eye on your inbox for full details.

And if you’re not already, make sure you’re on the list to receive Griff’s daily newsletter, Power Income, right here.

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