Brian Stutland Ahead of today’s presidential election we noticed heavy call buying in the oil services sector. Call options on Schlumberger were particularly active, with 4.4 calls being bought for every put. The biggest trade of the day was the purchase of 3113 Jan. 77.5 calls for $0.59 with the stock at 69.10. This trader is bullish on the stock and expects it to appreciate by at least 13% before expiration in 73 days. The oil services sector, Schlumberger included has lagged the S&P 500 this year on falling oil and gas prices, as well as oversupply in North America. However, Schlumberger looks poised to outperform the sector going forward due to its strong international presence. Schlumberger also generates $6.49 in cash per share, which has allowed it to consistently buy back shares and raise its dividend 15-20% annually. This likely to drive share appreciation over the long term, but in the short term the stock is likely to be driven by the outcome of today’s election. The Romney campaign has been seen as pro-oil, and a victory could mean opening more land to development by energy companies. This would benefit Schlumberger, who oil companies hire to develop and manage oil fields. Buying out of the money call options on a high quality oil services name like Schlumberger is a good way to play expectations of a Romney victory in the polls tonight because of their fixed risk and potential for unlimited profits.
Joe Tigay 
