Bulls Buy Call Spreads on Weatherford (WFT)

WFT – Weatherford International Ltd. – Shares of the provider of equipment and services used for the drilling, completion and production of oil and natural gas wells increased as much as 6.50% during the session to secure an intraday high of $16.04. Weatherford’s shares are currently up 3.80% to stand at $15.63 as of 2:20 pm (ET). Options on the oil services firm are trading most heavily in the August contract following second-quarter earnings released this morning. Weatherford reported earnings of $0.11 per share, excluding certain items, which exceeded average analyst expectations of $0.07 a share. Notable call buying took place in the August contract, but one bullish player with a longer-term optimistic view of WFT purchased a plain-vanilla debit call spread in the November contract. The trader picked up 2,000 calls at the November $16 strike for an average premium of $1.42 each, and sold the same number of calls at the higher November $19 strike for $0.40 in premium apiece. Net premium paid to initiate the transaction amounts to $1.02 per contract. The call spreader is prepared to make money as long as Weatherford’s shares rally 8.9% over the current price of $15.63 to surpass the average breakeven point at $17.02 by expiration day. Maximum potential profits of $1.98 per contract are available to the bullish trader should shares of the underlying stock surge 21.5% in the next several months to November expiration.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.