Long-Term Bears Look Past the Seadrill Limited (SDRL) Bounce

Seadrill Ltd (SDRL) is trading atop its 10-week trendline for the first time in months


Published on Feb 2, 2015 at 10:42 AM
Updated on Apr 20, 2015 at 5:32 PM

Seadrill Ltd (NYSE:SDRL) is up 5.2% this morning to trade at $11.29, on news that the number of operational U.S. oil rigs declined last week. The gap higher has the stock sitting above its 10-week moving average for the first time since early September. Meanwhile, options activity is ramping up.

Puts are in especially high demand, running at seven times the average intraday rate, and more than doubling the number of calls on the tape. In the top spot is the January 2017 5-strike put, where new positions are being purchased in the hopes of a long-term decline in SDRL shares. Specifically, the LEAPS buyers anticipate the stock will breach $5 -- putting it in all-time-low territory -- by January 2017 expiration.

Today's penchant for scooping up puts is nothing new. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SDRL has racked up a put/call volume ratio of 3.37 -- with puts more than tripling calls. What's more, this ratio ranks in the 90th annual percentile, suggesting a healthier-than-usual appetite for bearish bets over bullish.

As alluded to, Seadrill Ltd (NYSE:SDRL) has had a rough time on the charts. On a year-over-year basis, for example, the stock is down 68.2%.

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