NEW YORK, April 6 (Reuters) - Traders in the equity options market are betting the U.S. energy sector is ripe for a bounce with one gauge of sentiment, options on the largest energy sector tracking fund, dipping to its least bearish position in six months.
Recent trading in the options on the Energy Select Sector SPDR Fund and individual energy company options, including Devon Energy Corp and Halliburton Co, highlights changing sentiment toward more investor optimism.
“It looks like this week traders have started to position for upside in the energy sector,” said David Russell, senior manager at online broker E*Trade Financial Corp in Chicago.
Buoyant oil prices since President Donald Trump’s election have not provided a boost for energy stocks as the sector’s profit rebound has lacked vigor. The S&P energy index is down about 6.4 percent this year, making it the worst-performing sector among S&P’s tracking indexes. The broad benchmark S&P 500 stock index, in contrast, is up 5.3 percent for the year.
However, the recent climb in crude oil prices and upbeat expectations for the upcoming earnings season may be leading options traders to grow more bullish on the sector, analysts said.
Through Wednesday, open put options on the Energy Select Sector fund outnumbered call options by a 1.34-to-1 margin, the lowest in six months, according to New York-based options analytics firm Trade Alert. In December, this measure of options market sentiment had soared to a bearish 2.57-to-1 margin, a 26-month high.
Put options convey the right to sell shares at a fixed price in the future and are often used to protect against market declines. Calls, which convey the right to buy shares in the future, are usually used for bullish bets.
Traders have also taken a liking to near-dated bullish options on Devon Energy, Halliburton and Schlumberger, said Fred Ruffy, analyst at Trade Alert.
Wall Street analysts expect a big rebound in energy earnings from a year ago, when S&P 500 energy companies had a loss because of a sharp selloff in oil prices, according to Thomson Reuters data. (Reporting by Saqib Iqbal Ahmed; Additional reporting by Caroline Valetkevitch; Editing by Daniel Bases and Tom Brown)