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BHI - $81.62 - Baker Hughes Intl

The sharp drop on Monday to $84 from a new all time high that morning at $89.30 appeared to be enough of a dip to buy. That was a wrong assumption! After a rebound on Tuesday the bottom fell out as the broader market imploded. BHI hit a low of $78 on Thursday before rebounding to $83. You would think we were trading Internet stocks in 1999. I sent an update on Monday night recommending an entry on Tuesday and put us in the position at $6.

I did not specify any put insurance thinking we could do that this weekend. On Wednesday night I recommended the following changes to the BHI position.

Sell Jan $100 Call BHI-AT, stop loss @ BHI $85
Buy Jul $80 Put BHI-SP, stop loss @ BHI $85
Exit target on July $80 Put BHI @ $75.

After observing the action on BHI on Thr/Fri I am making the following changes.

New exit targets:
Jan $100 Call BHI-AT, stop loss @ BHI $84
Jan $100 Call BHI-AT, profit stop @ BHI $75
Jul $80 Put BHI-SP, stop loss @ BHI $84
Jul $80 Put BHI-SP, profit stop @ BHI $75

The high volatility caused a significant jump in premiums and I want to avoid that premium deflation if we do get a rebound. If we are stopped out of the insurance at $84 I want to add the following July put as insurance on a return to $80.

If the July $80 put is stopped at $84 place an order to buy the July $75 put BHI-RO if BHI trades at $80 again.

Company info:

Baker Hughes Incorporated (Baker Hughes) is engaged in the oilfield services industry. The Company supplies wellbore-related products and technology services and systems to the oil and natural gas industry on a worldwide basis, including products and services for drilling, formation evaluation, completion and production of oil and natural gas wells. Baker Hughes operates through subsidiaries, affiliates, ventures and alliances. It operates in three business segments: Drilling and Evaluation, Completion and Production, and WesternGeco. The Drilling and Evaluation segment consists of the Baker Hughes Drilling Fluids, Hughes Christensen, INTEQ and Baker Atlas divisions. The Completion and Production segment consists of the Baker Oil Tools, Baker Petrolite and Centrilift divisions. The WesternGeco segment consists of the Company's 30% equity interest in WesternGeco, a seismic venture with Schlumberger Limited. WesternGeco provides reservoir imaging, monitoring and development services.

Position: Jan $95 Call BHI-AS @ $6.20

Additions 6/08
Short: Jan $100 Call BHI-AT, entry $3.20
Long: Jul $80 Put BHI-SP, entry $4.30

Exit targets:
Jan $100 Call BHI-AT, stop loss @ BHI $84
Jan $100 Call BHI-AT, profit stop @ BHI $75
Jul $80 Put BHI-SP, stop loss @ BHI $84
Jul $80 Put BHI-SP, profit stop @ BHI $75

Entry $85.24 (6/6)

 

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