Why traders are buying puts in Targa


Targa Resources shot to all-time highs this week, but traders are positioning for a potential pullback.

optionMONSTER's Depth Charge system detected heavy buying Wednesday in the August 48 puts, which saw 2,145 contracts trade for prices between $0.85 and $0.95. Open interest in the strike was a mere 22 puts before the session began, indicating that these are new positions.

NGLS rose 0.56 percent to close at $52.11, a day after hitting a lifetime peak at $53. The natural-gas and oil services company broke out of a three-month range last week, rising above its 50-day moving average while drawing bullish call buying in the August 55 strike on Monday.

Wednesday's puts were not tied to any stock trading identified by our scanners during the session, though they could have been bought as a hedge by shareholders looking to protect earlier gains . The options could alternatively be making an outright bearish bet that NGLS will drop below $48 by mid-August, back under the 50-day line. (See our Education section)

Despite Wednesday's truncated session, total option volume in the name was more than 3.5 times its full-day average for the last month. Puts outnumbered calls by 19 to 1.

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