Bears re-enacted the Battle of Mactan on Friday killing Magellan (NYSE:MMP) after weeks of toying with their prey. The income staple gave up more than half of its annual yield equivalent (2.51% of 5% annual) on an otherwise good day for energy. Income-generating energy sector peers NuStar Energy (NYSE:NS), Holly Energy (NYSE:HEP), Blueknight Energy (NASDAQ:BKEP), TransMontaigne (NYSE:TLP), Kinder Morgan (NYSE:KMP), and Genesis Energy (NYSE:GEL) dodged the beating and there was little news of import. For weeks sellers greeted Magellan with a none-shall-pass blockade at the 69 level. Friday's selloff accelerated as the day wore on and bulls gradually seemed to abandon their weeks-long buying campaign, the stock finally settling at 67.23.
Perhaps once it was apparent bears were not going to let this stock get to 70 some buyers lost interest in supporting the stock. Especially the ones with call options to buy 54,400 units at $70, almost a quarter of the average daily trading volume of 230,000. Especially because Friday was the last trading day before those options expired. (Source: ETrade)
It appears that once the owners of $70 June 16 calls realized that their options would expire worthless they stopped trying to send the stock higher and owners of the $67.50 and $70 puts took over and sold the stock short to drive the stock price down and the value of their puts higher. Whether or not this is what happened, these scenarios play out constantly and most especially around options expiration. Being aware of these positions can help investors understand short term price movement and spot trends to pick good entry and exit points for their trades.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.