Dykstra: High Oil Offers Up Solid Options Play

Microsoft(MSFT) blew out earnings Thursday and should help boost the market. Technology stocks have provided solid earnings this past quarter, with the likes of Microsoft and Intel(INTC) becoming growth stories once again.

Although tech has flexed its strength, I would like to once again focus on the oil sector, this time with Hercules Offshore(HERO).

I last wrote about the company on March 21. Hercules offers drilling and lift-boat services to oil and natural gas exploration companies, and with oil booming, these stocks look well poised to rebound from their early summer decline. Yesterday I wrote about Unit,(UNT) an excellent value in oil stocks. Hercules provides an equally attractive play.

The stock is trading just about at long-term support levels that will provide solid support for a company trading with a PEG ratio of 0.24. When I look for cheap PEG, I expect to find a company at 1 or less. With Hercules, we have a rare opportunity; both the technical and fundamental metrics for this company indicate a rebound is in order.

The company's shares closed Thursday at $24.87, well off the 52-week high of $36.97. With the price of oil soaring, Hercules' stock should reclaim some lost ground. I will place a limit order to buy 10 April 17.50 calls (HIQDW) for $7.90 or better.