Andrea Kramer (akramer@sir-inc.com) Transocean Ltd. (RIG) will confess its third-quarter earnings next week, with the offshore drilling diva expected to report after the closing bell on Wednesday, Nov. 3. Ahead of the event, the stock's calls have been flying off the shelves, as evidenced by its 10-day call/put volume ratio of 4.32 on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). This ratio stands at a 52-week peak, implying that speculators haven't initiated bullish bets over bearish at a faster clip at any other time during the past year.
Most popular have been the equity's out-of-the-money November 70 and 75 calls, which have added roughly 5,000 contracts and 4,000 contracts, respectively, during the past couple of weeks. Nevertheless, the in-the-money 55 strike is still home to peak call open interest in the front-month series, with almost 47,000 contracts in residence.
However, while short-term traders have ramped up their bullish exposure on RIG, one longer-term trader is taking the directionless road less traveled by employing a long strangle.
Late yesterday, the investor bought symmetrical blocks of 1,300 January 2011 57.50-strike puts and 72.50-strike calls, resulting in a net debit of $3.85 per pair of options. To profit on the play, the strategist needs the shares of RIG to do one of two things before expiration: fall beneath the $53.65 level (put strike - net debit), or power atop the $76.35 level (call strike + net debit). But, even if the stock remains stagnant over the next few months, the most the trader can forfeit is capped at the initial premium paid.
In early trading, the shares of RIG have given up 1.2% to flirt with the $63.35 level.
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