How to get long an energy stock with substantial comeback potential, according to options trader

As oil prices start to climb again on the back of lower inventories and increasing tensions in the Middle East, energy stocks are back in the spotlight. SLB (SLB) has been on our radar for some time and its recent underperformance produces an interesting opportunity to gain long exposure with substantial upside potential. SLB has declined nearly 25% since Sept of last year but recently put in a double bottom around $43, which signals a potential end to the bearish trend. Just yesterday, SLB broke out above its bearish trendline that has been in place since April, coupled with its recent breakout above its $46 resistance level targets $49 and $55 to the upside. . The business also looks quite attractive from a fundamental perspective, trading at only 13 times forward earnings, despite analysts expecting EPS to grow by a strong 21% with decent net margins of 12%. That’s nearly a 35% discount to the average S & P 500 stock, implying that the technical upside target is well within its historical valuation range. With low volatility, options prices on SLB are extremely inexpensive and would benefit from a simple strategy such as buying a call option. I’m going out to Aug and buying the $45 in-the-money call option for a $3.65 Debit. This strategy has a breakeven price of only $48.65, which requires only a 2.5% rally in the stock over the next 50 days to profit with unlimited profit potential above that. Additionally, we are only risking 7.7% of the stock’s price to gain unlimited upside exposure. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.