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Should Options Traders Watch OFS Stock Returns?

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Dec. 4 2020, Updated 10:53 a.m. ET

Oilfield services stocks with high implied volatilities

Seadrill (SDRL) fell 7.5% in the past year. It has the highest implied volatility of all the oilfield services companies that make up the VanEck Vectors Oil Services ETF (OIH). In the past five days, Seadrill stock fell 8%. Investors turned bearish on Seadrill stock following its plan to raise $1 billion in capital.

The above table shows the one-year and last-five-day returns of the stocks we identified in the previous part as having high and low implied volatility. Generally, high implied volatility stocks either fell or moved sharper than low implied volatility stocks.

While CARBO Ceramics (CRR) rose the most among the oilfield services stocks with high implied volatility in the last five days, Seadrill lost the most during this period. CARBO Ceramics’ stock price rose 7.2% on February 3, 2017. On January 26, 2017, the company announced its 4Q16 earnings.

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ENSCO (ESV) is the only OFS stock that gained in the past year among the list of high implied volatility oilfield services stocks. In the past four quarters, ENSCO’s revenue fell 45.8% and its operating income fell 71.3%. ENSCO’s operating profit margin is 34.9%—compared to the industry median of -5.1%.

Weatherford International (WFT) fell the most in the past year among the list of high implied volatility oilfield services stocks. In the last four quarters, Weatherford’s revenue fell 30.1% and its adjusted operating loss rose to $399 million in 4Q16—compared to an adjusted operating loss of $388 million in 4Q15. Weatherford’s operating profit margin is -15%—compared to the industry median of -5.1%. Weatherford announced its 4Q16 earnings on February 1, 2017.

Returns of oilfield services stocks with low implied volatilities

Core Laboratories (CLB) rose the least in the past year among the list of low implied volatility oilfield services stocks. In the past four quarters, Core Laboratories’ revenue fell 18.2%. Its operating profit margin is 16.7%—compared to the industry median of -5.1%.

In the next part of this series, we’ll look at the oilfield services stocks with the highest short interest-to-equity float ratios.

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