Has tide turned for ocean drillers?

By David Russell,

Shutterstock photo

For the second session in a row, the bulls are looking for a rebound in offshore-drilling companies.

Yesterday optionMONSTER's Heat Seeker monitoring program detected upside option activity in Rowan and Transocean. Today the bullish paper is hitting in Seadrill .

More than 3,000 July 35 calls were purchased in SDRL, most of which priced for $1.35 and $1.40. Volume was more than triple open interest at the strike, which indicates that new money was put to work on the long side.

Calls lock in the price where a stock can be purchased, letting investors cheaply position for a rally. They can also generate significant leverage if shares move in the right direction. (See our Education section)

SDRL is up 1.3 percent to $33.96 in afternoon trading but has lost 17 percent of its value so far this year. It's been weak along with other companies in the industry amid weak demand for ocean rigs. However, our researchLAB analysis tool shows that land-based energy frackers have been rallying. Flotek , a high-flyer in that group, is surging in the wake of bullish call buying.

Total option volume is still below average in SDRL, but calls outnumber puts by more than 5 to 1.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: SDRL

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