How Are Options Traders Reacting to Berkshire's Latest Buy?

Occidental Petroleum (OXY) shares declined 6.2% to $44.77 after Berkshire Hathaway announced a $9.7 billion all-cash acquisition of its OxyChem business, despite Berkshire's existing 28.2% stake in OXY. While the stock faces broader underperformance, options traders are exhibiting a mixed but increasingly bullish sentiment today, with call volume significantly outpacing puts, and affordable premiums (SVI at 33%, 12th percentile) suggesting potential for premium-selling strategies given OXY's history of lower realized volatility.

Analysis

Occidental Petroleum (OXY) is experiencing significant selling pressure, with its stock declining 6.2% to $44.77 following the announcement of a $9.7 billion all-cash sale of its OxyChem division to Berkshire Hathaway, a major shareholder with a 28.2% stake. This price action represents a reversal of premarket gains and has pushed the stock to test its 80-day moving average, threatening a breach of its recent upward channel. The stock's performance has been weak, down 16.4% year-over-year. In stark contrast to the negative equity reaction and a historically bearish options sentiment, indicated by a Schaeffer's put/call open interest ratio (SOIR) of 1.18 in the 96th percentile, today's options activity shows a sharp bullish turn. Options volume is five times the intraday average, with calls (82,000) heavily outnumbering puts, centered on new positions in the weekly 10/3 46-strike calls. This suggests a strong speculative bet on a near-term rebound. Furthermore, volatility metrics support strategic options plays; the Schaeffer's Volatility Index (SVI) is at a low 33% (12th annual percentile), making options premiums affordable, while the low Schaeffer's Volatility Scorecard (SVS) of 19 implies the stock consistently realizes less volatility than options have priced in.

Key Decisions for Investors

• Investors should note the divergence between the stock's negative price reaction to the asset sale and the surge in bullish call option volume, which indicates a speculative bet on a near-term price recovery.
• Given the stock's history of realizing lower volatility than priced by options (SVS of 19) and the current low implied volatility (SVI in the 12th percentile), consider premium-selling strategies like writing cash-secured puts or covered calls.
• Monitor the stock's ability to hold its 80-day moving average; a failure to do so could confirm the bearish technical trend, whereas a bounce could validate the bullish positioning seen in the options market, particularly around the $46 strike price.