Market Insights

Antero Resources has pulled back after a big rally, and options traders could be looking for a bounce.

Heavy put selling was detected yesterday morning in the natural-gas producer. More than 29,000 29-May 31 puts changed hands. The first large block priced for $0.25, followed by another chunk for $0.20. Volume was well above open interest, which confirms a new position was implemented. Some 3,500 May 33.50 puts also traded for $0.30. Both contracts expire after earnings next Wednesday, April 29.

Puts are often purchased to position for a drop because they fix the price where a security can be sold. However investors can also sell puts when they see limited downside in a stock. They collect premium and agree to buy shares at a lower price.

AR fell 1 percent to $38.23. The stock rallied more than 30 percent between late February and late March, benefiting from the Iran war lifting energy prices. It gave up most of those gains in the first half of April but is trying to bounce around previous highs. That could make some chart watchers think old resistance has become new support. The 50-day moving average also had a “golden cross” above the 200-day moving average last month. Both patterns are potentially bullish.

Antero Resources (AR), daily chart, with select patterns and indicators.

Fundamentally minded investors could also see potential opportunity as AR integrates its recent purchase of gas fields from HG Energy. The assets are in West Virginia’s Marcellus shale, with an established connection to Maryland’s Cove Point LNG terminal. That could help the company sell into a global market squeezed by the closure of the Strait of Hormuz.

Overall option volume in AR was quadruple the daily average, according to TradeStation data.

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