Bulls Think Ensco Is Down but Not Out

By Pete Najarian, co-founder of OptionMonster

NEW YORK -- Ensco (ESV) has been drilled lately, but option traders are looking for a rebound.

OptionMonster's tracking system showed volume surging in the July 46 calls Wednesday, with blocks trading for $1.15. About 2,600 of the options traded -- not huge, but well above previous positioning of just 131 contracts in the strike, indicating clearly that these are new positions.

Those calls lock in the purchase price for the stock, so they can deliver major leverage if Ensco rallies. But these options will expire worthless in about a month if no move takes place.

The company provides contract drilling services to the energy industry, with rigs off Brazil, Europe, and Africa. The stock, already weakened along with most other oil and gas names, closed lower by 1.83% to $42.89 Wednesday and is down more than 25% since late February.

Total option volume was twice its average daily amount in the session. Calls outnumbered puts by a bullish 12-to-1 ratio.

Najarian has no positions in ESV.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.