Big Shorts in Oil and Gas Drillers (DO, RIG)

Diamond Offshore Drilling, Inc (DO) is an oil and gas drilling contractor that operates offshore rigs. The company’s stock is currently trading around $44.00 in a 52 week range of $43.95-$73.19. The stock has been massively under-performing the market this year with shares falling nearly 22% year to date. Options action during today’s session suggests that traders believe this trend will continue through the rest of the year. Earlier in today’s trading session a trader bought 1,652 DO Jan 2015 36.25 puts for $1.61. In addition to this large put order in DO we have also seen massive put buying in Transocean Ltd. (RIG) which operates in the same sector as DO. With shares if DO hitting fresh 52 week lows in today’s session we believe the chart is indicating lower prices. With a bearish chart we believe that this order flow signals for a short opportunity in DO.

Trade: Buying the DO Jan 2015 36.25 for $1.70
Risk: $170 per 1 lot
Breakeven: $34.55

Andrew Keene

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