Ensco plc (ESV) is a London based oil and gas drilling and exploration company, and currently the world’s second largest offshore driller by total fleet size. As of the writing of this article (10:30AM CST), ESV is currently trading lower on the day, down 3.37% to 30.40. The stock printed 52 week lows earlier in the session, as the decline in oil prices to levels not seen in around four years continues to drag down the stock price of offshore drillers. ESV is down over 50% from its trading levels of around the 60.00 at this time last year.
As ESV, much like crude prices at large, has been firmly entrenched in a strong and seemingly unending downtrend for most of this year, it should come as no surprise that we saw some extremely bearish unusual options activity in the name today. Earlier this morning we saw a large buyer of the Jan ’15 26 Puts step in and buy 2,471 contracts at the offer for $0.45, and another 1,939 contracts around 35 minutes later for $0.60 for a total cash outlay of $237,535 before commission costs. Based on the open interest of just 337 contracts we know this was an opening transaction, looking to profit on what would be over a 10% further decline in the stock price by the January ’15 monthly expiration. As both the ESV stock and global oil prices have yet to make any real indication that they can cease hemorrhaging at current rates, I am inclined to lean bearish with the large put buyer from this morning.
Trade: I bought the ESV Jan 26 Puts for $0.475 on Average
Risk: $47.50 per 1 lot
Breakeven: $25.525
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