Our Work On Both APC and OXY

As Wall Street’s version of a mating dance plays out, this morning Occidental (OXY) raised their offer for Anadarko (APC) to $76 in cash and stock. Our work at Investitute and our HeatSeeker nailed the early buying in APC prior to the Chevron (CVX) bid and the resulting windfall was 27 x the initial call buying. Some thought the die was struck and that Chevron would walk away with the prize, but again, our systems said otherwise.

To wit, we picked up strong put buying in OXY August 55 puts with shares trading $63.70 (4/17/2019) and simultaneous sales of the August 70 calls. Such a trade, often referred to as a risk reversal, is most profitable if share prices decline, as the put options would increase in value, and the calls that were sold would be worth less.

And then there’s the HUGE upside call bets in Anadarko that had been made since the April 12th takeover approach by Chevron. Last Thursday (4/18/2019) we tracked over 10,000 of the April 26th expiration 67 calls bought for $0.32. As always, when we see a block this large, the equivalent of 1M shares of APC, and the time frame for something to happen is so short, we believe someone has tomorrow’s newspaper today!

These calls are now intrinsically worth $4.55, as shares of APC surged to $71.55 in the pre-market. That’s 1400% return and that my friends is why we trade! Both May and June 65 calls are likewise in the money substantially, and worth $7.50 and $9 respectively, if APC opens around this $71.55 level.