Schlumberger Stock Brushes Off Q4 Earnings, Revenue Beat

Options bulls aren't deterred by SLB's pullback

Deputy Editor
Jan 22, 2021 at 10:32 AM
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Oil services and equipment provider Schlumberger (NYSE:SLB) is sinking this morning, despite a fiscal fourth-quarter earnings and revenue beat. While the company reported its first quarter-over-quarter increase in revenue since its third quarter of 2019, a sector-wide drop for energy-related stocks is putting a damper on SLB. At last check, the security was down 0.7% at $24. 

The equity has been testing support at the 320-day moving average this month. The trendline coincides with the $24 level, which is also home to SLB's pre-bear gap lows. While the oil stock is now on track for its third-straight drop, the 40-day moving average sits just below as a potential net as well, keeping the security at a roughly 10.2% lead year-to-date.

Sentiment surrounding SLB has been generally optimistic. Of the 17 analysts in coverage, 11 consider it a "buy" or better, compared to just six "hold" ratings. Plus, the 12-month consensus price target of $25.64 is roughly a 7% premium to current levels. 

Adding to this, SLB sports a 50-day call/put volume ratio of 5.43 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than all other reading from the past year. This suggests long calls haven't been more popular in the past year. 

A look at today's options activity shows more of the same. So far, 14,000 calls have crossed the tape -- twice the intraday average -- compared to over 2,000 puts. The weekly 1/29 26.50-strike call is the most popular, followed by the weekly 1/22 25.50-strike call.

All things considered, now looks like an opportune time to get in on Schlumberger stock's next move with options. The equity's Schaeffer's Volatility Index (SVI) of 51% sits in the particularly low 14th percentile of its 12-month range. This means options players have been pricing in relatively low volatility expectations.

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