Scott Bauer Lays Out How To Play Halliburton's Options After Massive Fall

Shares of almost all oil companies took a major hit Friday following the sharp drop in oil prices after OPEC’s announcement that it plans to keep the production level steady. One of the biggest losers among oil stocks on Friday was Halliburton Company HAL, which fell almost 11 percent to $42.40.

Scott Bauer, senior market strategist at Trading Advantage, was recently on Bloomberg to discuss options of oil stocks following OPEC’s announcement and his options trade for Halliburton.

“I think the option market actually got surprised by such a big move and you can look at the USO, which is the US Oil exchange traded fund, which has just massive amounts of volume to it and today there’s actually, the put buying to call buying is outweighed by about three to one, but what’s really interesting is you are seeing a lot of put buying going out to April,” Bauer said.

On his Halliburton option trade, Bauer said, “This trade in Halliburton I have is taking advantage of some very limited upside. I have no risks for the downside and quite frankly if volatility comes in, which volatility right now is off the charts, it’s going to be a great thing for my trade.”

“I want to buy one of the December $43.50 calls, so just above the market here and I am going to sell two of the December $45.50 calls. I can do that for, even it doesn’t cost me anything, I am not going to collect anything. So, basically I have zero downside risks whatsoever, I have risk if the stock trades above $47.50.”