Option Investor
New Plays

New Plays

Printer friendly version

BHP - $43.24 - BHP Billiton Limited

BHP fell about -$9 off its post Fed high to bottom on light support at $42. It rebounded +$2 on Friday afternoon from the post Fed lows and hopefully will begin moving higher from here. We are at the mercy of nearly every commodity as you can see by their company description. That is also a plus since a rebound in several will offset losses in others.

We were triggered on BHP when it dropped through the $46.75 entry point on Monday May-15th.

We will be taking out insurance on this position to get us past any future commodity declines. Buy the June put listed below.

Company Info:

BHP Billiton Limited is a diversified resources group. The Company is an exporter of metallurgical coal for the steel industry; an exporter of energy coal; a producer of iron ore, copper, nickel metal, manganese ore, primary aluminium and manganese and chrome ferroalloys. It also has substantial interests in oil, gas, liquefied natural gas (LNG), diamonds, silver and titanium minerals. BHP Billiton operates in seven segments: Petroleum (oil, natural gas and LNG), Aluminium (aluminium and alumina), Base Metals (copper, silver, zinc and lead), Carbon Steel Materials (metallurgical coal, iron ore and manganese), Diamonds and Specialty Products (diamonds, titanium minerals and metals distribution), Energy Coal (energy coal) and Stainless Steel Materials (nickel metal, and chrome and nickel ferroalloys).

Breakdown trigger $46.75 hit 5/15
Position 2008 $50 LEAP Call LPH-AJ @ $7.50

Insurance put:
Buy JUNE $40 Put BHP-RH currently $.80 cents

Entry $46.75 (5/15)

MDR - $65.35 - McDermott

McDermott is a very large provider of rigs, facilities and platforms for the drilling industry. They also build and/or manage nuclear power plants and are the go to company for almost any major project. They were one of my Top Three Picks for 2006. They were $40 when I recommended them in December for the end of year subscriber special.

McDermott spiked to early $74 after earnings on May 4th when they doubled earnings on a +43% rise in revenue and posted a +100% rise in order backlog to $5.93 billion.

Better yet, after a one day post Fed decline they have held their ground when all other energy stocks were in free fall. $64 is current support and a resumption of any kind of positive market should see them begin to move higher again.

Buy the insurance put recommended below!

Company Info:

J. Ray McDermott is a leading provider of engineering, procurement, construction, and installation services for offshore oil and gas field developments worldwide. McDermott International, Inc. is a leading worldwide energy services company. McDermott's subsidiaries provide engineering, construction, installation, procurement, research, manufacturing, environmental systems, project management and facility management services to a variety of customers in the energy and power industries, including the U.S. Department of Energy.

I hate to recommend a Jan-2007 LEAP because the time is short but the Jan-2008 LEAPS are very expensive for some investors. I am going to list both for reference.

Position 2007 $70 LEAP Call OYZ-AN @ $8.50
Position 2008 $75 LEAP Call YAE-AO @ $12.50

Insurance put:
Buy June $60 Put MDR-RL currently $1.15

Entry $66.05 (5/18)


Leaps Trader Play Archives