SU target of unusually high options trading on WednesdayUnknown if these were puts or calls purchased:
https://beststocks.com/suncor-energy-has-been-the-target-of-unusually-lar/ And no, it wasn't me this time. I hold no options at present, as SU did not drop below $30USD lately, my 'back up the truck with call options' price level. I missed buying them on the third pullback of the recent triple bottom on Jan 5, expecting further downside. Other than Sept 27 pullback, $30US has been an excellent rock solid support level. For my best chances of optioin success, I generally use options at the fringes of the price channel, and we are not near the bottom now.
That said, if I wished to play on a next week's potentially positive Feb 14 22Q4 earnings report and the slim chance of an announcement of a dividend increase or special dividend, the Feb 17, 2023 $32 SU calls expiring next week at $2.50 look interesting. Will see how the market is on Monday after Fridays nice move to the upside.
Also, looking further down the road, the 2025 Jan 17 $32 calls at $7.50 are tempting. They way I figure it, when it expires in 2 more years, if 20% additional shares in the SU float are bought back and cancelled by then, and if all things simply stay the same with the business, meaning zero cash flow growth in 2 years (LOL), it should equate to a share price of $34.27 / .80 = $42.83, which is already $10.83 above the strike, netting a profit of 3.33 on the option, (less commissions). Expect a truckload more if business improves in the next 24 months, and the energy sector gets some love, as it seems poised to do.
Whether to buy an option or hold the shares for me is a judgment call. Interest rates have gone up. On margin, I can borrow up to 70% of the cash needed to hold SU shares on the US side at 8.25% annual interest (7% on the Canadian side). The SU dividends help offset this cost.
Using options, there is a premium, which is higher the further away you are from expiry. One must weigh the costs of the premium on one vs margin interest on the other.
Furthermore, TD policy limits margin lending on one security to $1.5M value of any holding, but I have learned I can still own about $0.5M USD more under margin if I buy the stock on the US side. At TD, I use this glitch and apply it to the other large CDN heavy oil producer holdings as well. In that case, options are the only way to increase exposure to a holding.
Options carry risk as well. I took a $450k loss on MEG calls last year, but made up for it and a lot more on SU calls through the year. I heard the stats say 90% of options holders lose money, so you had better be quite confident in the price movement, timing, and direction.