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Bears are smelling blood in this name

The bears are smelling blood, at least in one area of energy stocks.

As a group, the oil service stocks have been a disaster, with the OIH, the ETF that tracks oil service stocks, off some 43 percent from its recent high. Yet, despite the fierce selling, a number of traders continue to wager bearish bets on one oil service stock in particular: Weatherford International.

On Monday, when shares of Weatherford International fell more than 5 percent to a three-year low, and options put volume ran more than nine times its daily average, one trader made a massive bearish bet that the stock will continue to get drilled.

Read MoreWall Street rallies despite weak oil

Specifically, the trader bought 11,000 August 7-strike puts for an average price of 55 cents. The strategy, which costs approximately $600,000, will profit if Weatherford's stock falls below $6.45 a share by August expiration, or roughly 35 percent as of Monday's closing price of $10.04 per share. The stock has been hit hard by crude's collapse, falling more than 50 percent in the last six months.

"An important thing that people should pay attention to when people are looking at these oil services names is many of them, like Weatherford, carry a lot of leverage," CNBC contributor Mike Khouw said Monday's on "Fast Money."

The trades come amid a dour backdrop for the sector. Sterne Agee's Stephen Gengaro lowered his profit outlook for the sector Tuesday, writing in a research note that that oil service names in particular are likely to "underperform the broader markets as oil prices sag and downward consensus estimate revisions unfold."

The oil services ETF, the OIH, is down 71 percent in the past year.

—Follow Options Action on Twitter @OptionsAction

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  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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