Weatherford International Plc (WFT) Option Bears Capitalize on $140M Settlement

Option bears are closing in on Weatherford International Plc (WFT) after a $140 million fine was levied against the oil stock

by Celeste Taylor

Published on Sep 27, 2016 at 3:53 PM
Updated on Jun 24, 2020 at 10:16 AM

Weatherford International Plc (NYSE:WFT) has agreed to pay $140 million to settle charges of deceptive accounting practices, which artificially inflated the oil services company's earnings. Following this news, WFT is currently down 5.4% at $5.22, and option bears are closing in on the energy stock.

Prior to today's decline, WFT had already had a rough year so far, currently trading down 37.9% since the beginning of 2016. While the shares seem to have found a floor at the $5-$5.50 level, WFT has also run into resistance from its 160-day moving average on several occasions this year. Longer-term, the 10-month moving average has ushered the stock significantly lower over the past several years.

In the option pits, puts are trading at three times their usual intraday clip, with put volume pacing in the 88th percentile of its annual range. Plus, WFT's daily put/call volume ratio of 4.45 arrives in the 95th annual percentile.

Drilling down, International Securities Exchange (ISE) data confirms a closing ratio spread of October 5 and 6 puts, which have been the most active contracts over the past two weeks, and are by far the most active contracts today, according to Trade-Alert. With Weatherford International Plc (NYSE:WFT) dropping today to its lowest intraday level since Aug. 2, this bearish spread trader may be taking advantage of the price decline to take some profits off the table.

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