VLO $35.87 - Valero
The Tuesday gap down open finally trigger the entry in Valero at $32 on its way to $29.32. Fortunately Valero figured prominently in the end of week refiner rally and closed right at a new two month high. Valero had to shut down three refineries in the Houston area totaling 700,000 bpd of capacity but they have 14 other refineries not in the hurricane's path to make up the difference. Falling oil prices and rising gasoline prices should continue to benefit Valero. The initial stop loss will be $29.
Valero Energy Corporation (Valero) owns and operates 17 refineries located in the United States, Canada and Aruba that produce conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants and other refined products. The Companys principal products include conventional and California Air Resources Board (CARB) gasolines, reformulated gasoline blendstock for oxygenate blending (RBOB), ultra-low-sulfur diesel, and oxygenates and other gasoline blendstocks. Valero also produces a substantial slate of middle distillates, jet fuel, and petrochemicals, in addition to lube oils and asphalt. Valero markets branded and unbranded refined products on a wholesale basis in the United States and Canada through a bulk and rack marketing network. It also sells refined products through a network of approximately 5,800 retail and wholesale branded outlets. Effective July 1, 2007, the Company completed the sale of the Lima, Ohio refinery to Husky Energy Inc.
Breakdown trigger: $32, hit 9/09
Position: 2010 $40 LEAP Call YPY-AH @ $4.50
USO $81.49 - US Oil Fund
After being on the watch list for six weeks the USO finally declined enough to hit our $82 entry point. With strong support at $80 I was confident last week that we would see a bounce. Given the price action in crude last week I am no longer confident. I believe crude will pause at $98 and that should equate to $80 on the USO. Hopefully the aftermath of hurricane Ike will not be detrimental to oil prices and we will see a rebound from support. If $98 crude breaks we could see a serious drop before OPEC could get its propaganda machine fired up. There is major support on the USO at $70 but we will be out well before that happens. Initial stop loss is $78.50.
United States Oil Fund, LP (USOF) is a commodity pool that issues limited partnership interests or units that may be purchased and sold on the American Stock Exchange (the AMEX). The Company invests in futures contracts for light, sweet crude oil and other types of crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the New York Mercantile Exchange (NYMEX), International Currency Exchange (ICE) Futures or other United States and foreign exchanges (collectively, Oil Futures Contracts). It holds interests in other oil-related investments such as cash-settled options on Oil Futures Contracts, forward oil contracts, and oil-based over-the-counter transactions. As of December 31, 2007, USOF held 4,754 Oil Futures Contracts traded on the NYMEX and 300 Oil Futures Contracts traded on the ICE Futures. The Company operates under full management control of its sole General Partner, Victoria Bay Asset Management, LLC (the General Partner).
I am not using LEAPS because I view this as a short-term trade.
Breakdown trigger: $82, hit 9/10
Position: JAN $90 Call UNA-AL @ $5.30