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Weekly Newsletter, Saturday, 01/20/2007

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Table of Contents

  1. Commentary
  2. Changes in Portfolio
  3. Portfolio Listing
  4. New Plays
  5. Existing Plays
  6. Watch List

Leaps Trader Commentary

$50 Oil

February crude futures hit $49.90 intraday on Thursday and that appeared to be a successful test of support at $50. However, appeared is the key word in that sentence. With a -$11 drop in the price of oil since 2007 began it was a perfect spot to close any short positions. This was even more compelling considering the February contract ceases trading on Monday. Why hold any short positions over the weekend where a geopolitical event could cause a monster spike in thin trading on Sunday night? It was the combination of multiple factors that caused a bounce at that $50 level. For the bulls it was a good place to stake a claim and begin venturing back into a decimated marketplace. For the bears it was the logical place to cover shorts. Add in the colder weather and expiration and you got a $2 bounce.

The key question is not what factors caused the bounce but will it stick? That my friends is the $64 billion question. Aside from the obvious challenges of temporary oversupply there are a myriad of other factors. All point to rising prices in the future but not necessarily next week. The government took away $14 billion in subsidies for offshore drilling in the gulf. That costs oil companies money. They are adding a $9 per barrel tax for environmental efforts. That also adds to the price you and I pay. Nobody expects the oil companies to absorb all that extra expense except for the democrats. You and I will pay at the pump for those actions.

Consider also that the oil produced from the Canadian oil sands is not commercially viable at much under $50. Ethanol is not commercially viable with oil under $50. It is already more expensive than gasoline once you add in the -30% drop in gas mileage. The oil companies cannot afford to explore in those very difficult places if oil is under $50. They are not going to spend $55 producing it from 30,000 feet under the ocean only to sell it for $40. Many production facilities will slow production if oil prices continue to fall just like the gas companies did this winter when gas prices fell below $6. Exploration and production companies are not in this business for the fun of it. It is a profit deal and without profit they will quit exploring. It has happened that way since the early 1900s.

In the late 90s when oil prices fell so low more than 500,000 oil workers were forced to find other jobs. Thousands of rigs were scrapped, literally cut up to make space for newer rigs that needed to be stored. Now there is a rig shortage that will not be rectified for another 5 years. Nobody wants a repeat of the 1990s. Nobody in the US, nobody in OPEC, Russia or Latin America. Everybody in the business whether a private company or a national oil company wants oil to go below $50. It is the new threshold where wants and desires will be turned into actions. Oil prices will move higher. They just may not move materially higher next week or next month. Oil is a long term business. Production decisions made today can take 3-6 months to have an impact.

Greenspan once used the tanker analogy to describe the US economy. It takes very little changes in policy to change the course of the economy but it takes a long time to see results. A small change in the rudder on the tanker can take miles to translate into a new course. It takes a lot of force to move a tanker from a standing start to full speed but it is practically impossible to stop once that speed has been attained. They have been likened to monster missiles that once launched they take miles to stop or turn. They say sailing ships have the right away in the ocean but having the right of way and being right in the way could have catastrophic effects.

Oil prices like oil tankers tend to move very slowly without the impact of external events. Prices are low today because Americans have experienced the warmest winter in 100 years in 2005 and the start of another scorcher in 2006. Only this week has regular winter weather returned to the northeast. The American Petroleum Institute released numbers on Friday showing that oil demand in America had dropped -3% due to the change in weather patterns. Since we are the largest consumer of oil on the planet that equates to about 750,000 bpd that is not being consumed. 22.5 million bbls per month. That is a lot of extra oil but that demand could return instantly with the return of cold weather. Granted it would take some time for heating oil supplies to be drawn down but it would have an eventual impact. It is probably too late this year to see any material impact from the weather on prices but that does not mean they would keep falling.

It may surprise everyone to learn that global supplies of oil have declined by 100 million bbls since Nov-1st. This was the target OPEC was shooting far with their November cuts. Saudi Oil Minister Ali al-Naimi confirmed last week that the reduction had been successful. You did not hear that on CNBC. You also did not hear that IEA said global demand rose +2% in Q4 compared to an average of just under 1% each in the first three quarters. This is a monster increase and was led primarily by India and China. This proves their need for oil is rising more rapidly than anticipated. The IEA also revised down for a second time their estimate of non-OPEC production growth for 2007 to 1.4 mbpd. This is a cut of 700,000 bpd since August 2006. At the same time they only lowered their global demand projections by about half that amount. Remember Kazakhstan and all the glowing reports about how much oil would be produced there. It was reported by Dow Jones that Kazakhstan's energy minister said there will not be any increase in production because existing fields are declining too quickly.

With oil inventories dropping and production slowing why is it that oil prices are still declining? According to Goldman Sachs it is due to the excessive hedging by various groups. Production companies hedge by either selling future production into the futures market at the current price or by purchasing puts to create a floor for their prices. According to Goldman the open interest in put options is clustered heavily in the $50, $55 and $60 strikes. The speculators who sold the puts found themselves in danger of having the oil put to them and were forced to sell increasingly larger quantities of oil short to hedge themselves against a possible put execution. This is called delta-hedging. As prices collapsed through $60 it set off a round of selling that combined with the speculation shorting forced oil to $55 and that triggered yet another wave of sell stops to cover that strike price. Now that oil has tested $50 without another wave down we may be nearing the end of this vicious cycle. With February futures expiring on Monday there will be a lot of speculators breathing a serious sigh of relief.

That is good for you and for me. When oil tagged $50 last week it triggered another set of events. My volume of hate mail rose significantly. I use the "hate mail" term in jest because many just wanted to give me some "constructive" criticism. Basically readers were venting because we did not capture profits when oil prices broke $60. I understand perfectly. I eat my own cooking by taking my own recommendations and some of it was hard to swallow. This is supposed to be a long-term position and not a group of short-term trades. In long term investing you have to take the dips in stride and sometimes add to positions on those dips. However, I guarantee everyone had I known that oil was going to break $60 and go straight to $50 in little more than two weeks I would have exited some positions. Hindsight is 20:20 but foresight is always a little hazy. I had nobody email me before New Years and say "exit, oil is going to $50." I assume that means you were in the same boat with me waiting for that three month trading range from $60-$65 to breakout to the upside.

January is supposed to be a bullish month for oil prices with Jan/Feb the highest demand for heating oil. In Jan-04 oil gained +$3 on its way to a +$25 gain to $55 in October. In Jan-05 oil gained +$5 on its way to a +$30 gain to the August highs of $70.40. In Jan-06 oil gained nearly +$11 from the 12/23/05 lows of $60.55 to the Feb-1st high of $71.70. In all three years the beginning of January marked the low point with rising prices into the fall hurricane season. If somebody would have told me this year was different I doubt I would have listened thinking the Aug/Dec decline to support was the worst of it.

If you feel I let you down, I am sorry. I feel your pain because my portfolio is down also. I feel I represent the facts as I know them but I never want to be seen as representing the future as fact. Nobody can ever know exactly what is going to happen in any market. If I always had the right answer this newsletter would be $10,000 a month and worth every penny. I would rather readers see me as a seeker of the truth in the reasons behind the moves in oil and as a fellow investor trying to make the most out of the facts as we know them. I probably spend 60 hours a week researching the oil story as I write this newsletter and my coming book. Even with all that research it is impossible to foresee the short term swings in prices. That is why investing is a long-term proposition. We need to buy the dips and not cuss them, or maybe do both. I am always at my computer and I welcome any emails both positive and negative. (Jim@OptionInvestor.com) I don't claim to have all the answers but I will try to answer your concerns.

For the most part I think the decline in oil stocks ended about two weeks ago with only a few exceptions. The sharp drop in oil prices was seen by most investors as temporary and they refused to bail out of their positions and began buying the dip last week. Look at the charts of stocks like APC, BTU, DO, DVN, HES, RIG, SU, SUN, UPL and VLO and they all look the same. Higher highs and higher lows this week after a bottom the prior week. Where we got hurt the worst was the Chinese stocks PTR and SNP. Those were killed by profit taking in the Chinese indexes after the New Years high. It was not specifically oil but the entire index that was sold off. Those are now beginning to recover as well.

We got a lot of help from Schlumberger on Friday. Their earnings spiked +71% and their guidance was gold plated. The CEO said exploration activity worldwide remained very strong and they saw "high growth" for the rest of the decade and beyond. He said cheap energy was behind us and companies knew they had to invest more to find and produce future wells. SLB has a backlog of contracts well into the future as existing projects are scheduled and completed. This strong guidance and the +$2 bounce in oil prices helped produce strong gains across the entire sector. Gas prices jumped +8% on Friday alone on the cold weather in the northeast and the prospect for a colder February. These factors helped power the energy sector to +4.8% gains for the week and make it the best performing sector. Who would have guessed last week that energy would outperform everything else?

We have a lot of energy earnings next week but I doubt they will be as positive as SLB. The outlook for energy earnings is relatively neutral so any good news should help the sector.

Having GE buy land and offshore equipment supplier Vetco Gray for $1.9 billion did not hurt oil sentiment either. With GE buying the company it doubles the headcount at GE Oil and Gas and gives them another leg up in the competitive field. Most feel GE will make another acquisition in the sector. Possible targets are Cameron International (CAM), Dril-Quip (DRQ) and FMC Technologies (FTI). GE is also said to be looking for a deep-water driller. However, on CNBC Friday morning CEO Jeffery Immelt said they were done for the year after a multi company shopping spree over the last two weeks. Do you believe him? I would think they could be looking at a equipment manufacturer like National Oilwell Varco (NOV) or Helmerich Payne (HP). Both are relatively small compared to GE sized acquisitions and that would give GE a foothold into every company that buys those products.

The average change for all our positions last week was a gain of about a buck. This was the week when oil broke $50. 12 of our 24 current stocks closed at a new high for 2007 on Friday. All things are not as bad as it would seem on the surface. Be sure to check the play notes for those positions you currently own.

There was some confusion last week with PetroChina (PTR). The "current recommendation" line in the body of the description said this:

Current recommendation: Buy at $128.50, stop at $124

PTR blew through $128 and $124. Several readers thought that meant we were stopped out of PTR. That is not the case. That recommendation line is for new entries. This is for readers who were not in the original position. Had you entered at $128.50 you should have been stopped out at $124 on that new entry. A stop loss on the original play would look like this:

PTR - $124.50 -1.28 - PetroChina *** Stop Loss $124 ***

That format is the header line of each play description. That is where any stop loss will be listed. Readers are always asking when they should enter existing plays if they did not get into them when first profiled. Use the "current recommendation" line for new entries only.

Jim Brown


February Crude Chart - Weekly

February Gas Futures Chart - 90 min

 


Changes in Portfolio

New Energy Plays

I wanted to add something here at a potential bottom but could not find a play worth the risk. Let's wait until after the earnings barrage over the next two weeks to see if there are any negative surprises. HP was one you might consider personally.


New Non-Energy Plays

None


Dropped Plays

None


New Watch List Plays Triggered

None


Portfolio Listing & Top Picks


New Plays

Most Recent Plays

None this week.
 


Play Updates

Existing Plays

The current format of the Play Updates has changed. Only the pertinent data that has changed from the prior week will be shown in an effort to concentrate more on new commentary on new plays rather than restating existing positions. Each play has a link back to either its last full commentary or its initial description.

*****************************

OSX - $189.54 +4.13 Oil Service Index - Stop loss OSX $160

No change, support at $180 is holding.

Index Description:

The Philadelphia Oil Service Index is an index of 15 companies that provide drilling and production services, oil field equipment, support services and geophysical/reservoir services. This index contains companies like Halliburton, Nabors, Schlumberger, etc.

Complete list of OSX components

To see the initial commentary on this position click here

Breakdown trigger $185 hit Jan-04

Position:
SHORT Sept $250 PUT - OFJ-UJ @ 58.50, Stop loss OSX $160

*********************

ECA - $46.64 +0.49 - Encana

Encana is respecting the support at $44 and the level where we entered the play. No change. Pray for continued cold weather.

To see the initial commentary on this position click here

Earnings schedule: Feb-15th

Current recommendation: Buy at $45

Breakdown target: $45 hit Jan-3rd

Position: 2009 $50 LEAP Call ZBM-AJ @ $6.60

Insurance put: None

************************

THE $32.16 -0.57 - TODCO

Lehman lowered its price targets but maintained an overweight rating on the stock. Strong support just below at $31. No change in play

To see the initial commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $32

Breakdown target $39 hit 12/7/06

Position: 2009 $45 LEAP ZYU-AI @ $8.40

Insurance Put: None


**********************

CHK $28.96 +0.91 - Chesapeake Energy

CHK found a bid after being named the Best Managed Oil and Gas Company by Forbes. They also announced the addition of the Varco CEO to their board. No change in play.

To see the initial commentary on this position click here

Earnings schedule: Feb-23rd

Current recommendation: Buy under $29

Position: 2009 $35 LEAP VEC-AG @ $5.30

Insurance put: none

*********************

FXI $106.35 +0.95 - FTSE/Xinhua China 25 Index Fund

The FXI rebounded from the prior week's dip and then stuck to $106 and did not budge for four days. This is a positive event given the profit taking in some of the Chinese stocks. I am hoping to see some further gains next week .

The iShares FTSE/Xinhua China 25 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 Index.

Component list

This iShare focuses on the largest companies in China (58% of it positions) and Hong Kong (42%). These are the most liquid companies in these markets. With Asia growing by leaps and bounds the FXI generated a +40% return in 2005 without using options. We hope to do better using LEAPs.

Current recommendation: Buy under $105

Breakout target: $94.50 hit 11/22/06 on gap open to $95.80

Position: 2009 $100 LEAP Call VHF-AT @ $13.50

No insurance

************************

MRO $87.17 +0.40 - Marathon Oil

Marathon announced a new deal with Syntroleum (SYNM) to license its Gas to Liquids and Coal to Liquids technology to produce synthetic crude. This was a new agreement that replaced a former agreement where they cooperated on a process demonstration facility. Marathon also got permission to begin development and operation of the Volund field on the Norwegian Continental Shelf. MRO is 65% owner of the field, which is thought to contain 50 million BOE. No change in play.

To see the initial commentary on this position click here

Earnings schedule: Feb-1st

Current recommendation: Buy at $85

Position 2009 $100 LEAP Call VXM-AT @ $12.60

Insurance put: None

*******************

HES - $50.52 +1.50 - Hess Corporation
(Formerly (AHC))

Hess set a high for the year on Friday and is preparing to test resistance at $51. No change in play.

To see the initial commentary on this position click here

Earnings schedule: Jan 31st

Current recommendation: Buy at $47

Position:
11/05/06 2009 $50 LEAP Call VHS-AJ @ $6.80

Insurance Put: Triggered Jan-3rd @ $49
01/03/07 May $45 put HES-QI @ $2.60, stop loss $51.50

************************

BTU - $40.83 +0.83 - Peabody Energy

BTU continued to climb to a new high for 2007 on colder weather, higher gas prices and expected production cuts to stabilize coal prices. No change in play.

To see the initial commentary on this position click here

Earnings schedule: Jan-25th

Current recommendation: Buy at $35

Position:
10/22/06 Jan-2009 $50 LEAP Call ZZT-AJ @ $8.70

Insurance put: Triggered with drop through $39
01/03/07 March $35 Put BTU-OG at $1.15, stops at $35 and $42.50

*******************

DVN - $67.66 +2.03 - Devon Energy

Devon set a new high for 2007 on Friday. Devon also announced that India's Prize Petroleum was in talks to buy Devon's assets in Egypt. This is following Devon's effort to consolidate operations into its core components.

I suggest closing the insurance put if DVN trades at $68.50.

To see the last full commentary on this position click here

Earnings schedule: Feb-7th

Current recommendation: Buy at $65

LEAP Position:
10/03/06 Position: 2009 $70 LEAP Call VVH-AN @ $9.00

Insurance put: Triggered 12/18 at $69
Position: Apr-2007 $60 Put DVN-PL @ $1.30, close at $68.50

**********************

RIG - $75.80 +1.13 - Transocean Inc

RIG continues to lag the rest of the sector but support at $72.50 continues to hold. No change in play.

Their rig report released Jan-5th

To see the last full commentary on this position click here

Earnings schedule: Feb-14th

Current recommendation: Buy at $75

LEAP Position:
10/03/06 Position: 2009 $80 LEAP Call VOI-AP @ $12.90

Insurance put: Triggered at $79 on Jan-3rd
1/3/07 Feb $75 PUT RIG-NO @ $2.55, stops $70.50, $78.50

**********************

TSO - $70.67 +2.69 - Tesoro Corporation

FBR upgraded TSO to a buy and that was good for a +$6 gain over the last two weeks. FBR also said Tesoro was sitting on a pile of cash that could be used for a share buyback. No change in play.

To see the last full commentary on this position click here

Earnings schedule: Feb-1st

Current recommendation: Buy at $65.00 with stop at $60

LEAP Position:
10/04/06 Position: 2009 $70 LEAP Call ZGC-AN @ $7.70

Insurance put: None

*******************

APC - $42.95 +1.12 - Anadarko Petroleum

APC announced a deal to sell its 28 Permian Basin fields in West Texas to Apache for $1 billion. They also announced the sale of its Wyoming Elk Basin and Gooseberry fields to Encore Acquisition for $400 million. Three weeks ago it announced a sale of two fields in Louisiana to Exco Resources for $1.6 billion. APC is trying to cut its debt from $26 billion to $12 billion by the end of 2007. The majority of the debt was acquired in its two major acquisitions of Kerr-McGee and Western Gas Resources in 2006. No change in play.

To see the last full commentary on this position click here

Earnings schedule: Feb-6th

Current recommendation: Buy at $41, stop at $37

LEAP Position:
9/20/06 Position: 2009 $50 LEAP Call OCP-AJ @ $6.90
Cost adjustment for expired Jan put +2.35 = $9.35

Insurance put: 9/25
Position: Jan $40 PUT APC-MH @ $2.35, expired

*******************

SU $73.79 +0.67 - Suncor Energy

No news but their earnings date was announced for next week. Support at $70 holding. No change in play.

To see the last full commentary on this position click here

Earnings schedule: Jan 25th

Current recommendation: Buy at $70

LEAP Position: 9/11/06
Position: 2009 $80 LEAP Call OYX-AP @ $14.30
Cost update Dec put expired: +2.10 to $16.40

Insurance put: 9/18
Position: Dec $60 Put SU-XL @ $2.10, expired

*******************

SLB $60.28 +3.11 Schlumberger

SLB spiked +$3 on earnings that increased +71% to $1.13 billon. The company gave golden guidance for years to come and produced a sizeable bounce for the entire energy sector. No change in play.

To see the last full commentary on this position click here

Earnings schedule: Jan 19th, +71% to $1.13 billion

Current recommendation: Buy at $60, stop at $55

LEAP Position:
1/2 9/11/06 @ $8.60
1/2 9/12/06 @ $8.00
Position: 2009 $70 LEAP Call VWY-AN @ $8.30
Cost update for expired Jan put +2.00 = $10.30

Insurance Put: 9/18
Position: Jan $50 Put SLB-MJ @ $2.00, expired

*******************

UPL $50.50 +2.55 - Ultra Petroleum

UPL blasted off on Friday as gas prices moved higher. UPL has been creeping higher all week and Friday's SLB news and gas jump finally produced a breakout to a new high for 2007. No news and no change in play.

UPL said recently that their profit margins at $4 gas were +30%, $6 gas 50% and $8 gas 100%. They have a 16-year inventory of wells to be drilled.

AMEX Oil & Gas Conference Dec 5th
Enercom Oil and Gas presentation

To see the last full commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $45, stop at $40

LEAP Position:
9/12/06 Position: 2009 $60 LEAP Call OZH-AL @ $10.60
Cost update expired Jan put +2.85 = $13.45

Insurance Put:
9/18 Position: JAN $40 Put UPL-MH @ $2.85, expired

*******************

SUN $60.28 +0.45 - Sunoco

Sun set a new two-week high on Friday but it was less than exciting. No news and no change in play.

To see the last full commentary on this position click here

Earnings schedule: Jan-31st

Current recommendation: Buy at $60, stop at $54

LEAP Position:
9/12/06 Position: 2009 $70 LEAP Call VUN-AN @ $13.50
Cost update expired Jan put +2.40 = $15.90

Insurance Put:
Position: Jan $55 Put SUN-MK @ $2.40, expired

*******************

PXP $44.51 -0.39 - Plains Exploration

Minor loss on no news and no change in play.

OGIS Investment Conference on Oct-4th

To see the last full commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $44, stop $40

LEAP Position:
9/12/06 Position: 2009 $50 LEAP Call ZXL-AJ @ 7.50
Cost update expired Jan put +1.90 = $9.40

Insurance Put:
9/25 Jan $40 Put PXP-MH @ $1.90, expired

*******************

FST $30.17 +0.49 - Forest Oil

Still no earnings date but I am expecting strong results when they are announced. No news and no change in play.

Enercom conference presentation

To see the last full commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $30, stop at $27

LEAP Position: 9/12/06
Position: 2009 $40 LEAP Call OJG-AH @ 4.50

No insurance due to cheap LEAP

*******************

VLO $51.04 +0.47 - Valero Energy

Valero announced a +50% increase in its dividend to 12 cents from 8 cents per share. They also announced the Chairman was leaving to spend more time in Valero LP and Valero GP. The current CEO will assume the Chairman position as well. VLO closed at a new high for 2007 on Friday. No change in play.

To see the last full commentary on this position click here

Earnings schedule: Feb-1st

Current recommendation: Buy at $50, stop at $45

LEAP Position:
9/24/06 Position: 2009 $60 LEAP Call VHB-AL @ $7.70
Cost update expired Jan put +2.25 = $9.95

Insurance Put:
Position: 9/25 Jan $45 Put VLO-MI @ $2.25, expired

*******************

PBR - $94.59 +0.19 - Petroleo Brasileiro

Petrobras debt was upgraded to investment grade by S&P on Friday. Petrobras had no previous rating by S&P. This is expected to help PBR reduce its borrowing costs and allow more investors access to its debt. Support held. No change in the play.

To see the last full commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $92, stop at $85

LEAP Position:
9/08/06 Position: 2009 $100 LEAP Call VDW-AT @ $14.90
Cost update Jan expired put +1.80 = $16.70

Insurance put:
9/11 January $70 PBR-MN @ $1.80, expired

*******************

DO - $79.21 +2.39 - Diamond Offshore

No news, nice gain to a new closing high for 2007, no change in play.

To see the last full commentary on this position click here

Earnings schedule: Feb-8th

Current recommendation: Buy at $75, stop at $69

LEAP Position:
8/29/06 Position: 2009 $80 LEAP Call VCT-AP @ 14.20
Cost reduction: Oct $70 Put profit -3.15, cost now $11.05
Cost increase: Dec $60 put expired -2.40, cost now $13.45

Insurance Put:
10/08 Dec $60 Put DO-XL @ $2.40, expired

Position closed:
10/03 October $70 put DO-VN @ $1.65, exit @ $4.80, +3.15

************************

ATPG - $38.22 +0.61 - ATP Oil and Gas Corp

No further news. ATPG announced last week record production of 50.5 bcf in 2006. Oil production increased to 3.2 mmboe from its gulf operations compared to 0.7 mmboe in 2005. Still no earnings schedule. No change in play. I would be a buyer here based on the very strong outlook and activity in 2007 and beyond.

To see the last full commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $38, stop at $34

LEAP Position:
8/20/06 Position: 2009 $40 LEAP Call VCL-AH @ $11.70
12/17/06 Cost update expired Dec 35 put -1.50 = $13.20

Insurance put:
9/06 Position Dec $35 PUT HKU-XG @ $1.50, expired

***********************

PTR - $124.55 -2.85 - Petrochina

Wake me when the bleeding stops! I believe $120 should be the bottom for this pounding but so far there is no material rebound. Friday's +3.80 gain would be even better if we saw a back to back gain on Monday. I would be a buyer here at this level. I own it and I think the major problem was profit taking on the indexes not in oil. The profit taking on the indexes appears to be slowing.

I still believe this stock could be well over $150 before our 2008 LEAP comes due.

To see the last full commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $125.50, stop at $119

LEAP Position:
5/14/06 Position: 2008 $120 LEAP Call LJC-AD @ $16.20
Cost adjustment: Close short Dec $115 call +1.30 = $17.50
Cost adjustment: Close long July $90 puts +3.00 = $20.50
Cost adjustment: Close long Sept $110 put -2.60 = $17.90
Cost adjustment: Expired Dec $100 put +2.20 = $20.00
Cost adjustment: Closed Jan $135 put -2.60 = $17.40

Insurance put: (12/31)
1/03/07 Jan $135 Put PTR-MG at $138.50, $1.90
1/04/07 Profit stop at $132.50, $4.50 for +2.60.

Insurance put: (9/11)
Position: December $100 Put PTR-XT @ $2.20, expired

Insurance put: (8/13)
Position closed:
Sept $110 Put PTR-UB @ $2.40, stop @ $106 @ $5.00, +2.60

Insurance combo: Closed
Short: Dec $115 Call PTR-LC @ $3.20, 6/13, exit $4.50, -1.30
Long: (2) July $90 Puts PTR-SR @ $3.70, 6/13, exit $0.70, -3.00

Insurance puts: (Closed 6/7)
Closed: June $105 PUT PTR-RA, @ $4.20 (5/22), exit 6/7 @ $4.30

****************************
Non-Energy Positions
****************************

DHI - $27.53 +1.13 - DR Horton

Homebuilders caught fire and DHI is back to 8-month resistance highs. Resistance at $27.50 is the current challenge. No change in play.

To see the last full commentary on this position click here

Earnings schedule: Jan-23rd

Current recommendation: Hold

LEAP Position:
9/24/06 Position: 2009 $25 LEAP Call VEI-AE @ $5.10

Insurance put: None
 


Leaps Trader Watch List

Dropped Entries

None


New Watch List Entries

None

Current Watch List

None

Of the current play list I like ATPG, FST and MRO for new entries.
 


DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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