Intra-Week Blog, Wednesday, 03/08/2006 12:20:50 AM ET
HAVING TROUBLE PRINTING?
LEAP Update - March 7th, 2006
The drop in oil prices this week has given us an opportunity to enter some additional positions. Numerous candidates on the watch list were triggered today and a couple are close enough I am going to take the entry anyway.
The potential settlement with Iran over their nuclear ambitions removed some support from oil prices and they tumbled to $61.50 and just above initial support at $61. OPEC is also expected to leave production at current levels and that also relieved some pressure.
However, OPEC has openly been supporting $60 as the new floor and that could be tested this week. We are rapidly approaching the normal time for a ramp in prices in advance of the summer driving season. This should offset some of the relief over Iran and OPEC.
We were triggered on PBR, RAIL, XLE and BTU positions when they hit our target prices on today's dip. We missed the PCU trigger at $78 when the price dipped to $78.02. That is close enough for me and I am adding it today. SLB dipped to $114.20 with our entry target at $114. Again, that 20 cent difference is close enough for our purposes and SLB will join the play list today.
So far Tenaris has not dipped to the $156 entry target yet but with a -$15 drop so far this week anything is possible. Options are very expensive for TS and I only want to enter if our trigger is hit.
Recap of new Watch List positions triggered today:
PBR - $86.05 - Petro Brasileiro
Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a mixed-capital enterprise of which a majority of voting capital must be owned by the Brazilian Government. The Company is engaged in a range of oil and gas activities, which include segments such as exploration and production, refining, transportation and marketing, distribution, natural gas and power, international, and corporate. Besides the dominant market position in Brazil, Petrobras has oil and gas activities in international locations, with significant international operations in Latin America, the Gulf of Mexico and West of Africa. During the year ended December 31, 2004, the Company had estimated proved developed and undeveloped crude oil and natural gas reserves of approximately 11.82 billion barrels of oil equivalent in Brazil and other countries.
Breakdown target $87.00
2007 $95 LEAP Call VDW-AS @ $8.40
SLB - $114.85 - Schlumberger Ltd.
2:1 Split April 7th
Schlumberger Limited (Schlumberger) is an oilfield services company that supplies technology, project management and information solutions for the oil and gas industry. Schlumberger consists of two business segments: Schlumberger Oilfield Services and WesternGeco. Schlumberger Oilfield Services is an oilfield services company that supplies a range of technology services and solutions to the international petroleum industry. WesternGeco, jointly owned with Baker Hughes, is a surface seismic company. On January 29, 2004, Schlumberger completed the sale of its SchlumbergerSema business to Atos Origin. During the year ended December 31, 2004, Schlumberger completed the initial public offering of Axalto and no longer retains any ownership interest in this business.
Breakdown target $114.00
2007 $120 LEAP Call VWY-AD @ $14.00
BTU - $46.85 - Peabody Energy
Peabody Energy Corporation (Peabody) is a private-sector coal company in the world. During the year ended December 31, 2004, the Company sold 227.2 million tons of coal. It sells coal to over 300 electricity generating and industrial plants in 16 countries. The Company owns, through its subsidiaries, majority interests in 32 coal operations located throughout all the United States coal producing regions and in Australia. Most of the production in the western United States is low-sulfur coal from the Powder River Basin. In the West, it owns and operates mines in Arizona, Colorado, New Mexico and Wyoming. In the East, it owns and operates mines in Illinois, Indiana, Kentucky and West Virginia. The Company owns four mines in Queensland, Australia. Most of the Australian production is low-sulfur, metallurgical coal. In addition to the mining operations, the Company markets, brokers and trades coal.
Breakdown target $48.00
2008 $55 LEAP Call LLW-AK @ $9.50
PCU - $79.38 - Southern Copper Corp
Southern Copper Corporation, formerly Southern Peru Copper Corporation (SPCC), is an integrated producer of copper that operates mining, smelting and refining facilities in the southern part of Peru. The copper operations of the Company involve mining, milling and flotation of copper ore to produce copper concentrates, the smelting of copper concentrates to produce blister copper and the refining of blister copper to produce copper cathodes. SPCC also produces refined copper using the solvent extraction/electrowinning (SX/EW) technology. Silver, molybdenum and small amounts of other metals are contained in copper ore as by-products. Silver sold is recovered in the refining process or as an element of blister copper. Molybdenum is recovered from copper concentrate in a molybdenum by-product plant.
Breakdown target $78.00
Sept $85 Call PCU-IQ @ $6.20
XLE - $51.56 - Energy Select SPDR
The Energy Select Sector SPDR Fund (the Fund) is an index fund that seeks to replicate the total return of the Energy Select Sector Index of the Standard & Poor's 500 Composite Stock Index (S&P 500 Index). During the fiscal year ended September 30, 2004 (fiscal 2004), the Fund had a return of 48.27%, as compared to the Energy Select Sector Index return of 48.91% and the S&P 500 Index return of 13.87%. The Fund invests in industries, such as energy equipment and services, and oil and gas services, among others. In fiscal 2004, its top five holdings were Exxon Mobil Corp., ChevronTexaco Corp., ConocoPhillips Inc., Schlumberger Ltd. and Occidental Petroleum Corp.
Breakdown target $52.00
2007 $55 LEAP Call OJW-AC @ $4.10
RAIL - $65.69 FreightCar America
FreightCar America, Inc. is a manufacturer of aluminum-bodied railroad freight cars (railcars) in North America. The Company specializes in the production of coal-carrying railcars, which represented 78% of its deliveries of railcars, during the year ended December 31, 2004, while the balance of its production consisted of a broad spectrum of railcar types, including aluminum-bodied and steel-bodied railcars. It also refurbishes and rebuilds railcars and sells forged, cast and fabricated parts for all of the railcars that the Company produces, as well as those manufactured by others. Prior to April 1, 2005, the Company was named FCA Acquisition Corp. On April 1, 2005, a former parent company, also named FreightCar America, Inc., merged with and into FCA Acquisition Corp., with FCA Acquisition Corp. being the surviving corporation. In connection with the merger, FCA Acquisition Corp. changed its name to FreightCar America, Inc.
Currently the longest option you can buy is the September series.
Breakdown target: $67.
Sept $80 Call RQN-IP $4.00