IVolatility is a leading provider of options data, analysis tools and best-in-class volatility charts.

A strategy idea for options trading investors.

Oil Service Ideas – Nabors Industries

Although higher crude oil prices are usually the driving force for higher prices in the oil service sector, many of these stocks have declined substantially in the last few weeks. This despite the fact that drilling rig counts are up 14% internationally and up 21.3% in the U.S. compared to last year. If crude oil prices stabilize in the current $90 price range chances are the earnings estimates for the oil service stocks will be too low.

Here is one idea that follows the Wall Street adage that says “Buy the ones that go down the least since the smart money is in them.”

Of course, the same Wall Street adage also says to “Buy the ones that have gone down the most since they have the greatest potential to rebound.”

Here’s an idea fitting this description.

Nabors Industries Ltd. (NYSE: NBR) $24.87 reported to be the largest owners of land drilling rigs. They should benefit from continued expansion in the shale plays requiring high horsepower and newer technology for horizontal and diagonal drilling.

The current Historical Volatility is 39.88 with an Implied Volatility Index Mean of 37.92, down from 41.39 last week, for an IV/HV ratio of .95 and a put-call ratio on the bearish side at .75. Friday’s option volume was 3,015 contracts compared to the 5-day average of 7,130 contracts.

Due to time decay over the long weekend, the spread should be priced around .53 on Tuesday before considering any price change. Use a close back down below the last pivot at 22.43 as the SU (stop/unwind).

The suggestions above are based upon last Friday’s closing prices using the mid price between the bid and ask. On Tuesday, the option prices will be somewhat different due to the time decay over the weekend and any price change.

Visit IVolatility for more trading ideas and volatility charts.