Transocean LTD (RIG): This Oil Play Could Potentially Triple Traders’ Money in Just 5 Months

Rule Two: Buy more time until expiration than you may need — at least three to six months — for the trade to develop.

Time is an investor’s greatest asset when you have completely limited the exposure risks. Traders often do not buy enough time for the trade to achieve profitable results. Nothing is more frustrating than being right about a move only after the option has expired.

With these rules in mind, I would recommend the Transocean LTD (NYSE:RIG) Jan 2014 44 Calls at $4.75 or less.

A close below $44 in Transocean LTD (NYSE:RIG) on a weekly basis or the loss of half of the option’s premium would trigger an exit. If you do not use a stop, the maximum loss is still limited to the $475 or less paid per option contract. The upside, on the other hand, is unlimited. And the January 2014 options give the bull trend more than five months to develop.

This trade breaks even at $48.75 ($44 strike plus $4.75 options premium). That is only about $1.25 above Transocean LTD (NYSE:RIG)’s current price. If shares hit the $60 target, then the call options would have $16 of intrinsic value and deliver a gain of more than 200%.

Recommended Trade Setup:

— Buy RIG Jan 2014 44 Calls at $4.75 or less
— Set stop-loss at $2.37
— Set initial price target at $16 for a potential 237% gain in five months

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