Seadrill Limited (SDRL) Bounce Brings Option Bulls

Traders expect Seadrill Ltd (NYSE:SDRL) to continue bouncing back

by Alex Eppstein

Published on May 21, 2015 at 2:40 PM
Updated on Jun 24, 2020 at 10:16 AM

A week ago at this time, Seadrill Ltd (NYSE:SDRL) was getting devastated. Today, however, the shares are blistering up the charts -- surging 8.6% to trade at $13.90, as crude bounces back on overseas unrest. As such, calls are being exchanged at 1.2 times the typical intraday rate.

Among the most popular SDRL options is the weekly 5/29 15-strike call, and data suggests new positions are being purchased. By scooping up these out-of-the-money calls, speculators are banking on the shares to topple $15 by next Friday's close, when the series expires -- a time frame that includes the company's first-quarter earnings report, due out next Thursday, May 28.

Longer term, it's puts that have been the options of choice among SDRL traders. During the past 50 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has accumulated a put/call volume ratio of 1.44 -- higher than roughly two-thirds of comparable readings taken in the last year.

This skepticism isn't all too surprising, considering Seadrill Ltd's (NYSE:SDRL) technical woes. Year-over-year, the shares have plummeted 62%, and more recently, have found a stern layer of resistance at their 160-day moving average.

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