With society progressively returning to the “old” normal and concerns about energy supply, the hydrocarbon sector has been on a roll. Suncor Energy (NYSE:SU) appears to be a favorite among options traders, as Barchart contributor Will Ashworth pointed out earlier this month. And the love is still going strong, with SU stock up slightly more than 5% in the previous week.

So, what exactly is going on? Several factors are at work.

Fundamentally, as CNN Business reported on August 4, energy stocks are making a comeback after trailing earlier this year. Surprisingly, this underperformance occurred in the midst of OPEC+ producers proposing supply cuts in an effort to boost crude oil prices. However, the industry has finally begun to respond. In addition, Saudi Arabia cut output by one million barrels per day in July, perhaps hastening the recovery.

Furthermore, social circumstances are rapidly evolving toward full normalization, which includes workplace advances. Employers are essentially returning their employees back to the office, which has enormous ramifications for traffic volumes and, as a result, demand for integrated oil firms like Suncor. Notably, the number of car miles traveled has been gradually growing.

That’s all well and good, but the anomaly is that SU stock is a troublesome case among energy players. Most notably, net income fell 53% to 1.88 billion CAD in the company’s second quarter, from 4 billion CAD in the same quarter last year. Furthermore, revenue came in at 7.94 billion CAD, falling short of the average expectation of 8.58 billion CAD.

Nonetheless, SU stock has recently received great attention. You may thank institutional investors.

Unusual Options Activity Is Unusual for SU Stock

Following the closing of the session on August 30, SU stock was one of the top highlights in Barchart’s screener for anomalous stock options volume. Total volume reached 268,430 contracts, with an open interest reading of 374,107. Furthermore, the difference between Wednesday session volume and the trailing one-month average metric was 1,043.33%.

According to the transactional breakdown, call volume reached 266,076 contracts, while put volume was only 2,354. This pairing produced a put/call volume ratio of 0.01, implying an extremely bullish profile without any further context. Also, the put/call open interest ratio is 0.27, which, in itself, signals longer-term optimism.

Still, it’s tough to draw a comprehensive insight from the headline type alone. Instead, to gain more insight, analyze what the truly smart money – the institutional players – may be doing. Fintel’s options flow screener allows investors to search for large block options trades likely done by institutions.

The most recent trade among the institutions is for $32 calls with an expiration date of September 15, 2023. According to Fintel’s screener, the activity involved bought calls, which resulted in volume being sent to 19,235 contracts. Looking at the latest odd options activity for SU stock on Barchart’s radar, the volume of said contract reached 21,245.

In case you’re wondering, the open interest of 2,308 contracts tells me I’m looking at the same contract. The same is true for Barchart and Fintel. By combining the two data points, we can conclude that 90.54% of the anomalous options activity for the $32 calls may be attributable to institutional traders.

Looking at all non-expired contracts, both bullish and bearish action is visible. However, there are noticeably more positively oriented transactions than countervailing holdings among major investors. If you wish to bet on SU stock, you can do it with confidence knowing that the alpha dogs have your back.

Ignore the Hype and Invest in Suncor (If You’re a Speculator)

Granted, the state of the consumer economy casts some doubt on SU stock. For example, Americans’ credit card debt has surpassed $1 trillion, a dubious record. This state primarily suggests a battening down of the hatches, which may be detrimental to the hydrocarbon space. Still, if you’re a speculator, you should consider joining the party and purchasing SU stock.

I say this mostly because the aforementioned job transition back to ordinary norms may induce anxiety. Yes, enraged employees have put up a fierce fight. When it comes down to it, though, employers nearly always have the upper hand since they sign the paychecks.

Farmers Group is one such example. The company’s new CEO overturned the previous administration’s remote-work policy in June of this year, requiring staff to be in the office three days a week. Naturally, the pivot sparked a commotion. Farmers, on the other hand, recently announced that it would lay off 11% of its workforce, or approximately 2,400 people.

How much do you want to wager that at least some people on Farmers’ payroll wish they had remained silent instead of yelling? Furthermore, when other employers implement return-to-work rules, affected employees may have gotten the hint by then.

To put it another way, now is a good moment to be in the oil business. If you’re willing to take the risk, SU stock is a cynical purchase.

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