Table pounder option trade

Transocean (RIG - $154), the world’s largest offshore drilling contractor, provides the most versatile fleet of mobile offshore drilling units to help clients find and develop oil and natural gas reserves. This company is in the sweet spot of the energy bonanza (the need to find more oil). A startling statistic about the world oil supply is, only 5-10% of the oil is actually owned by the major worldwide oil companies you and I think of (Exxon, Chevron, BP, Shell, etc.). 90%+ of the oil in the world reserves is owned by countries (and many of them are not friendly, safe places). Think Venezuela, Columbia, Iran, Africa, Saudi Arabia, Kuwait, Russia, etc. Many of these countries are raising taxes, or raising the amount of money they are demanding from the global oil companies to drill in their territory. There really isn’t much a major oil company can do if a government demands more money when they are extracting oil from their land. The thing is, with Transocean, no matter who owns the oil - a major global company, a friendly government, or an unfriendly one - they all need deep water rigs from Transocean to extract the oil. This should make RIG’s earnings power much more dependable than a major oil company over time (these governments don’t have the technology or deep water drilling rigs themselves). I have taken a sizable position in the August $200 calls here with a cost basis of $1.55. My reasoning for this trade is Transocean is about to get a much higher PE ratio. Schlumberger (SLB), another oil service company trades at 18x earnings while RIG trades at a huge discount at only 9.5x earnings. This is crazy in my opinion as deep water drilling is very predictable for the coming years. If RIG gets a PE of 13…the shares would trade up to $220. I think that is where this stock is headed this year. This is a potential home run trade.