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Presuming oil prices remain near the $100 per barrel level, oil service companies should continue to doing well as new Gulf of Mexico drilling permits are released. Here is a possible item for options trading investors that might be put in the special situation category.
Weatherford International Ltd. (NYSE: WFT) announcing it would be restating earnings by as much as $100 to $150 million for each year from 2007 to 2010. It 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.
After declining to the 20 level on the earnings restatement news, the stock held and did not decline with the market over the last two weeks.
The current Historical Volatility is 46.40 and declining, with an Implied Volatility Index Mean of 37.89, down from last week at 44.59, for an IV/HV ratio of .82 and a moderately bullish put-call ratio of .4.
| B/S | Qty | O/C | USym | Exp | Strike | P/C | Price | IV |
| B | 1 | O | WFT | May | 22 | Call | .83 | 40.65 |
| S | 1 | O | WFT | May | 25 | Call | .20 | 38.85 |
| S | 1 | O | WFT | May | 20 | Put | 1.13 | 41.58 |
| Cr | .50 |
Use a close back below 19 as the SU (stop/unwind).
MORE OIL & GAS OPPORTUNITIES
Presuming the equity markets are in the process of turning higher here are several April put sale ideas in the oil & gas and materials sectors that can be implemented now. Put sales provide an opportunity to benefit from declining implied volatility as the stocks begin to turn up. These are all April put sales to open.
| U Sym | Name | Friday Close | Strike | Price | IV |
| FCX | Freeport McMoRan | 51.78 | 50 | 1.76 | 43.62 |
| TCK | Teck Resources | 54.22 | 50 | 1.11 | 47.12 |
| CNX | Consol Energy | 53.93 | 47 | .56 | 49.08 |
| ATPG | ATP Oil & Gas | 18.31 | 16 | .53 | 73.25 |
Each of the above stocks have recently made well-defined pivots and turned higher. Use any close below their recent pivots as the SUs (stop/unwind). Alternatively be prepared to take any of the stocks by assignment in the event they may close below their strike prices on the April expiration. Often they will retest the lows before trending higher, which may also provide an opportunity to add to the positions presuming overall market conditions remain favorable.
All of the suggestions are based upon last Friday’s closing prices using the mid price between the bid and ask. On Monday, the option prices will be somewhat different due to the time decay over the weekend and any price change.
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