Sponsored By:

Superior Energy Services (SPN)

Dear Fellow Options Trader,

Superior Energy Services (SPN) is a high-quality oil service company that has gone a long way in diversifying its operations from the Gulf of Mexico to a broader geographic range.

In June of this year, the stock was trading at almost $58 per share. Today, it is about $19. Analysts expect the company to earn $4.09 this year and $4.59 next year. With the company trading at below five times 2008 earnings estimates, a lot of fear about negative earnings surprises has been priced into the stock.

Unlike exploration and production companies, oil service companies generally do not require huge amounts of new capital (debt) to conduct their operations. The entire energy group has been sold off in the tsunami of commodity hedge funds' liquidations. We believe this is creating some attractive values in the sector. Additionally, we believe the election results this coming Tuesday could serve as a positive catalyst as we come closer to having a cohesive federal energy policy.

The company is scheduled to report earnings tonight. In front of earnings, volatility is high. We recommend selling the SPN Nov 17.50 Puts (SPNWW) for $1.20 or better because we like selling volatility when it is elevated. We also do not mind taking ownership of this stock if it is put to us, as we see it going higher over time.

When selling a put ("Sell to Open," which gives you a credit up front), make sure you sell only the amount that you are comfortable owning if you are put the stock.

Have a great day trading.

Nick Atkeson and Andrew Houghton