A strategy idea for options trading investors.

Overview: Foster Wheeler (NASDAQ: FWLT)

Foster Wheeler provides construction and engineering services to the oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance industries worldwide.

The Swiss oil services company on May 3 reported first quarter income of $23 million or 18 cents per share, compared with $72.1 million or 56 cents per share for the first quarter a year ago. Management said the earnings miss was the result of lower margins from contracts awarded in the last few years.

Despite the report, the stock is down only 4.5% on the year as the sector remains resilient with commodity prices rebounding. With recent market volatility our sentiment is to take a bullish outlook for the stock.

Options Trade: FWLT Call Spread

With the stock trading at $34.25, we would consider buying the FWLT June 36/38 out-of-the-money call spread for $0.25. Buying the OTM call spread is a strategy with both limited risk and limited profit potential.

In this case the investor purchases the FWLT June 36 Call for $0.36 and sells the FWLT June 38 Call for $0.11, locking in a total risk of $0.25, the amount paid for the spread. Check the option chains for the current prices.

If the stock trades above a breakeven price of $36.25 by June expiration, the spread has maximum profit potential of $2.00, the difference between strike prices.

The benefit of this trade is that the amount risked is $25 while the possible gain is $200 on a stock that looks to rise before expiration on June 17.

Stutland Equities is a premier futures and options trading company on the Chicago Board Options Exchange. Founded in 2005 and headquartered in Chicago, Stutland Equities specializes in volatility arbitrage across multiple asset classes.