Oneok (OKE), a natural gas specialist, faces challenges despite strong financial results and political backing. With shares down 8.5% since posting second-quarter net income of $841 million, the stock has declined by over 27% this year. However, unusual options activity suggests professional investors anticipate OKE stock to remain above the $75 strike price by Sep. 19.

While analyzing unusual options activity can be beneficial, it may not accurately predict future outcomes. Using the volatility dependency approach, traders rely on implied volatility to project a target security’s range of possibilities. However, this method may not reflect actual market behavior and lacks consideration for American-style options.

Alternatively, path dependency forecasting involves analyzing actual pricing dynamics to predict future outcomes based on similar conditions. This descriptive approach converts price action into a binary code of accumulative and distributive sessions to facilitate cross-sector analysis. For OKE stock, a 4-6-D sequence suggests a 68% probability of upside price action the following week.

Incorporating the current week’s session, OKE stock now reflects a 3-7-D sequence, indicating a higher probability of next-week upside movement at 77.8%. To capitalize on this potential trend, a 70/75 bull call spread expiring Sep. 19 may be a conservative strategy, while a 75/80 bull call spread expiring Oct. 17 offers a more enticing payout of over 170%.

For a riskier trade, the 75/80 bull spread expiring Sep. 19 presents an opportunity for investors. With a potential profit of $370 for an upfront cost of $130, this strategy relies on the accuracy of forecasts. However, the riskier nature of this trade may deter some investors despite the enticing payout. Oneok’s post-earnings decline may present an opportunity for contrarian options traders, with potential for a 285% payout. Shifting paradigms to path dependency requires careful consideration. Josh Enomoto had no positions in mentioned securities. Information in the article is for informational purposes only. Originally published on Barchart.com.

Read more at Yahoo Finance: Why Oneok’s (OKE) Post-Earnings Meltdown May Spell Opportunity for Contrarian Options Traders