Shares of oil and gas equipment and services company
Schlumberger Limited (SLB) have gained 37 percent in the past year. One trader sees the stock continuing to rally in the coming weeks.
That’s based on the April $65 call. With 51 days until expiration, 35,216 contracts traded compared to a prior open interest of 234, for a 151-fold rise in volume on the trade. The buyer of the calls paid $0.36 to make the bullish bet.
Schlumberger shares recently went for about $54.50, so the stock would need to rise over $10, or over 19 percent, for the option to move in-the-money. That would also require shares to break past their 52-week high of $62.78 in the next month.
The company is performing well in today’s strong energy market. Revenues are up 27 percent over the past year, and Schlumberger has done even better with earnings growth of 77 percent.
It’s certainly likely that shares will move higher in the coming weeks, although perhaps not far enough to move the option trade in-the-money.
Action to take: Long-term investors may like shares here. The oil markets have years for the current boom to play out. Shares also yield about 1.9 percent, and the company recently raised its dividend.
For traders, the April calls will likely expire worthless. But they could still jump in the coming weeks, most likely on a short-term market rebound that pushes oil prices higher. Look for a quick pop to take profits.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.