by Tim Biggam | January 23, 2012 8:25 am
Weatherford International Ltd. (NYSE:WFT[1]) provides equipment and services used in the drilling, evaluation, completion, production and intervention of oil and natural gas wells to independent oil- and natural-gas-producing companies worldwide. The company was founded in 1972 and is headquartered in Geneva, Switzerland.
While the S&P 500 continues its inexorable march steadily higher, some sectors have actually not participated — with one sector, oil drillers, lagging sharply. Weatherford has been a recent underperformer to the sector as well, but is finally beginning to show some life.
Consensus earnings estimates are for $1.55 in 2012, putting its forward P/E right around the 10 level, in the lower quadrant for valuation. That being said, the company is growing at nearly 70%, with a price-to-book value of just 1.2, so shares are certainly cheap on a price-to-earnings-growth basis.
Technically, the shares are poised to break above the 200-day moving average at $17, which has also been a resistance level twice in the past.
Given the relative underperformance of the stock, I’m looking for WFT to break out to the upside and move to the $19 level by May options expiration.
Based on WFT’s current market price of $16.54 and using a target price of $19, a target date of May 18, 2012, and $1,000 of investment capital, this is an excellent candidate for capturing some nice gains by buying the WFT May 12 Calls or buying the WFT May 16-19 Call spread, or using another options strategy that best fits your trading style and goals.
For the full details on this trade, visit TradingBlock.com[2], create a free Instant Login and try the TradeBuilder feature, where you’ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy.
Create your free login, and get access to these WFT option trading strategies by visiting the TradeBuilder here[3].
Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, four years as Lead Options Strategist at ThinkorSwim and three years as a Market Maker for First Options in Chicago. Tim makes weekly appearances on Bloomberg TV “Options Insight”, Business First AM “Trader Talk”, TD Ameritade Network “Morning Trade Live” and CBOE-TV “Vol 411” to discuss everything from volatility and option related.
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