Something's make sense, other do not. Since the beginning of this selloff it makes a lot of sense that companies like Bank of America ( BAC) have taken it on the chin...and rightly so. The mess coming from our friends across the pond is a of major concern to the financial sector. The new Volker rule isn't helping those firms either. Other firms like Procter & Gamble ( PG) or Wal-Mart ( WMT) also make sense if one thinks that we are entering a double dip recession or Europe is going to slow down the world economy.

On the other hand, a company like Diamond Offshore ( DO) that is drilling up the world's increasingly scarce oil supply has taken it on the chin in a way in which I don't think the company has deserved. Yes, an economic slowdown affects DO in the very near-term, but oil prices are only going to go up. As the economy has slowed down, has anyone paid attention to the price of brent crude? It hasn't moved down very much, because no matter what the world economy does, oil will always be in demand.

Check out the T3/OP video with Jill and Scott. As they point out, we don't love it on the charts for a day trade, but fundamentally, DO has some strong metrics.





To make matters better for DO, the company is bouncing off of a VERY low in its stock price and has not rallied with the rest of the market in the way one might expect. I think it's a little strange that one of the companies that is sure to make money is not moving faster than the overall market. While DO typically seems to have a less-than-pleasant experience announcing earnings, I think this one could catch a nice rally into the next report.

Our plan is to buy calls in this stock, as the upcoming earnings are going to give options volatility a floor, then we are going to sell out before this company announces.

Trade: Buy to open DO November 60 calls for $2.30, or better.



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At the time of publication, Jill Malandrino, Mark Sebastian and Scott Redler held no positions in the stocks or issues mentioned.