Profit Worries Lead to Heavy Buying of B.J. Services Puts

With one week remaining before options expire, earnings chatter continues to fuel activity in the market.

Volatility Index
Today	% Change
25.01	+4.78%
Source: ILX

Oil drilling services firm B.J. Services(BJS Quote) saw plenty of put activity on the Chicago Board Options Exchange and the Philadelphia Stock Exchange today. The rumpus comes on the heels of a business outlook from fellow driller Rowan(RDC Quote) last Thursday. Rowan said the third-quarter outlook for drilling and oilfield firms was uncertain. The news, combined with the recent drop in crude oil prices, caused oil stocks to tumble. The CBOE Oil Index is down 12% since May 18.

Nasdaq Volatility Index
Today	% Change
53.19	-0.52%
Source: ILX

The July 30 put options on B.J. Services traded 6,800 contracts on open interest of 7,632, as the premium has jumped up to $7.70 ($770) ahead of its earnings announcement, which is scheduled for July 24. The August 25 puts traded 6,800 contracts on open interest of 418, at $3.70 ($370) a pop. In June, TheStreet.com reported heavy put-buying in the July 30 options with an investor rolling down from the July 35 puts. Since then, the stock has lost nearly 20% to $23.70 as of Friday's close, which prompted the investor to roll down yet again.

"The customer sold the July 30 puts to close, and bought the August 25 puts to open a new position," said Brian Carr, a specialist at Letco, the designated primary market maker in BJ Services. "If I had to guess, [the investor] is long the stock and does not want to sell out his position, so by rolling down he is buying himself some time."

Shares of B.J. Services traded down 8.1% to $21.65 in regular-session trading on the New York Stock Exchange.