Hey Trader,

As the world keeps a close eye on the developments of the Russian/Ukrainian border conflict, the effects of a militarized clash could have even deeper reverberating effects than you might think …

And there’s one gas giant that is feeling the crunch.

With a 20% stake in state-controlled Russian energy firm Rosneft PJSC, this oil company could find itself in a sticky situation if the current crisis is exacerbated …

And it looks like the options market is already being used to hedge some major player’s bets.

So which international oil titan is likely keeping an extra-close eye on the developing tension?

It’s none other than …

BP Amoco (Ticker: BP):

I can almost hear the sigh of BP execs …

BP Amoco (Ticker: BP) was just starting to challenge its pre-pandemic price levels, which saw the shares drop from $34.38 to $13.54 – that’s a 60% drop in less than one month!

Of course, that certainly isn’t unique to BP. The pandemic has been challenging to oil companies everywhere … though the current European energy crisis and gradual global reopening efforts have helped them gradually reclaim some of their lost ground.

Currently, BP is hovering near the $31-$32 mark, which is just off where it was trading before its COVID sell-off …

But now, the oil company is dealing with a new set of issues.

With the Russian and Ukraine crisis about to reach a boiling point, concerns about oil supplies (with Russia being the world’s second largest oil producer) are shaking up the oil and gas sector. 

Russian aggression towards Ukraine could result in sanctions from the US, UK, and EU.

And one stock especially susceptible to sanction concerns is BP, which owns around 20% of a Russian state-controlled energy giant, Rosneft PJSC.

Should Russia be hit by sanctions, BP would likely feel the pinch as well.

And in the options market, it looks like at least one trader is open to the possibility that BP shares may get hit by the headwinds …

Take a look at this out-of-the-money put-buy that crossed the tape on Tuesday:

You’ll see that 11,683 contracts of the April 24-strike puts were bought on Tuesday, for $0.25, or $292,075.

The 24-strike represents nearly a 25% decrease from BP’s current levels, and would erase all of the stock’s 2022 gains.

Rather than betting on a BP fall, this is likely a trader hedging, in case something does happen that weighs significantly on the share price.

While the open interest in this contract currently sits over 38,500, it holds only the second highest open interest among all open contracts – the first highest is the April 2022 32-strike call, which holds more than 43,000 open contracts.

And calls dominate the rest of the top 10 open interest spots, including the January 2023 30-strike and 35-strike calls, and the January 2024 25-strike calls.

So while it is clear that at least some Big Money traders are nervous in the near-term …

Overall, bullish sentiment prevails in the long-term BP pits.

However, it is worth noting that while open interest is still call-heavy, it is just slightly less call-heavy than usual, with 1.7 calls brought to open for each put, as opposed to an average of 2 calls brought to open for each put.

We will have to wait and see if BP will escape the conflict unscathed … or if its strong Russian ties will come back to haunt them.

Your Only Option,

Mark Sebastian