Volume Spike Investor

Plains Exploration & Production Company (NYSE: PXP) is trading more than 5,700 calls today, around 3X the norm, but the action is in the September $35 calls, where more than 4,065 have traded against no prior Open Interest, and shares are only at $28.74.  A large block of 2,000 bought at the offer is responsible for much of the action.  PXP’s fundamentals are not very strong, as shares have a lot of debt and trade 29X forward earnings, but ahead of August 6th earnings the action is substantially bullish due to an early morning note.  The note mentioned that a California budget proposal would authorize drilling off the Santa Barbara coast, with Plains Exploration the company set to drill off existing platforms.  Environmentalists are opposed to the first offshore oil lease in California in 40 years, but an agreement would generate $2 billion over its lifetime, including $100 million this year.  With a market cap of $3.36 billion, an agreement would be sure to send shares higher, and is likely the reasoning behind the bullish call activity in far out of the money strikes.

Joe Kunkle, founder of OptionsHawk.com