SandRidge Energy, Inc. (fka SDOCQ)

[someconcerns]

Thought this observation on an options play on SD might be of interest.
Steve

"Thursday Options Brief: SFD, SD, CBS & BMTI
by: Andrew Wilkinson March 24, 2011 | about: BMTI, CBS, SD, SFD

(snip)

SandRidge Energy, Inc. (SD) – A large three-legged options combination play on SandRidge Energy appears to be the work of an investor expecting the price of the underlying to pull back from today’s new highs. The natural gas and oil producer’s shares rose 4.35% this afternoon, peaking at an intraday- and new 52-week high of $11.98. The pessimistic player traded a total of 50,000 options on SD, most of them puts, which position him to make money if shares reverse course ahead of September expiration. It looks like the investor sold 10,000 calls at the September $14 strike for a premium of $0.94 each in order to partially finance the purchase of the 20,000-lot September $9.0/$11 put spread for a net premium of $0.74 each. Premium received on the sale of the call options reduces the cost of the bear put spread to around a net cost of $0.37 per contract. Thus, the investor stands prepared to profit should shares in SandRidge fall 11.3% to breach the effective breakeven price on the spread at $10.63 by September expiration day. Maximum potential profits of $1.63 per contract are available to the three-legged bear if SandRidge’s shares plunge 24.9% from today’s high of $11.98 to trade below $9.00 within the next six months to expiration. The short calls at the September $14 strike expose the investor to potentially devastating losses in the event of a sharp move higher in SD shares unless the three-legged play was initiated to hedge a long position, and those short calls are covered. SandRidge Energy, Inc. reports first-quarter earnings after the closing bell on May 5, 2011. "

Source:
http://seekingalpha.com/article/260027-thursday-options-brief-sfd-sd-cbs-bmti?source=yahoo