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SLB: Reader's Choice (Incl Video)

Stocks in this article: SLB

This complimentary article from Options Profits was originally published on April 26. Don't risk missing over 40 options trade ideas every week, exclusive commentary and webinars from over 15 experts. Click here for more information and a 14-Day Free Trial.

Schlumberger (SLB) provides a range of products and services from exploration through production and has a lot of room to rally right here. In 2Q11, the stock broke into the $90s, and as recently as February the stock was over $80. The downside is maybe $70. This is not a bad place to be for a stock in what appears to be shaping up to be a bull market.

The oil and natural gas boom has to be a good thing for SLB in the near-term, and I wouldn't be shocked if the current administration, that has been so anti-oil and nat gas exploration lets a few permits through over the next months, something that would help SLB's forward looking earnings. Any type of potential new drilling in the U.S. would be a very strong catalyst for a company like SLB.

Before we get into the options trade, let's review the fundamentals and charts with Jill and Scott in the T3/OP video:



The implied volatility (cost of insurance) on SLB options is low but not at a 52-week low or anywhere near rock bottom. This sets up a nice opportunity to stick our toe in the water buying calls but lends itself more to a call spread. I think SLB could make a nice run a to $80, so lets buy the June 75-80 call spread.

Trades: Buy to open SLB June 75 calls for $2.55 and sell to open SLB June 80 calls at $0.78.

Our target on the trade is to sell the spread at $3.00. If the spread drops below $0.85 we kill the trade.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

Mark can be followed on Twitter at twitter.com/OptionPit

T3Live can be followed on Twitter at twitter.com/_t3Live_

Scott can be followed on Twitter at twitter.com/RedDogT3Live

At the time of publication, Jill Malandrino, Mark Sebastian and Scott Redler held n positions in the stocks or issues mentioned.

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