Option Traders Pounce on Weatherford (WFT)

Weatherford (NYSE:WFT) has attracted the interest of options traders, but not in the way that was expected, as they shrugged of the $500 million accounting error and bought up call options on the company.

The feeling is it was a one-time error the company was involved in, and expectations are it'll bounce back when the market sorts that out.

William Lefkowitz, options strategist for vFinance Investments, said, "You're never really sure how serious a tax-accounting problem is. But if it's a one-time mistake and they clean it up, all of a sudden the stock could rebound. That's why people would buy the calls."

Over 121,000 calls were acquired on Weatherford's stock, in contrast to the 53,000 put purchased, according to data from Trade Alert.

The Wall Street Journal noted, "One of the biggest moves was a strategy that traders have dubbed a "call stupid" or 'stupid spread.'

"A 'call stupid' is the purchase of two batches of bullish options to make a doubly optimistic bet. In most other types of call spreads, traders buy one batch of options and sell another to cut down on the cost.

"The traders in this case bought long-dated January $22.50 and $25 Weatherford calls in a play for shares to gain substantially by the beginning of 2012, according to a report by Pipeline Trading Systems LLC."

Weatherford International closed at $21.14, falling $2.38, or 10.12 percent.