Option Investor
Newsletter

Weekly Newsletter, Saturday, 08/18/2007

HAVING TROUBLE PRINTING?
Printer friendly version

Table of Contents

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

Leaps Trader Commentary

$70 Oil, Gulf Hurricane

Just a couple years ago you could have seen that headline and immediately understand that oil had spiked to an unbelievable level of $70 as the result of a hurricane hitting the gulf oil fields and causing significant damage. Fast forward to 2007 and we find that even with a potentially damaging hurricane in the gulf, oil prices have fallen from the unbelievable level of $78.76 back to $70.10 in only two weeks. Times have definitely brought changes.

Hurricane Dean is currently a category 4 storm but is expected to become a category 5 as it nears the Yucatan Peninsula late Monday. Currently the majority of storm trackers are predicting an impact in northern Mexico and southern Texas but storms normally become erratic once they hit the Yucatan. The actual track is impacted by moving over the Yucatan land mass and away from the feeding influence of the warm water. There is also a high pressure area over the southern U.S. that is currently expected to keep pushing the storm south.

All of these predictions could change at any moment and that is what prompted a +$2 rebound in oil prices from Thursday's low. A hit on Mexico endangers 3.2 mbpd of oil production. 1.5 mbpd of that production is exported to the U.S. A slight move higher to hit Corpus Christi endangers three refineries and 5% of our total refining capacity. Just a little higher and Houston becomes a target with 9 refineries and 14% of our total refining capacity. With the current track predictions the majority of the gulf oil fields will escape any damage other than some evacuation related slowdowns. Any sudden shift northward and the oil fields could become a danger zone.

The final track will not be apparent until Tuesday morning at its present course and speed. That means oil prices should rise again on Monday as the news wires begin talking about the chances for any oil field impact and the storm hits cat-5 status. Once that final track is established prices should firm but not rise unless the oil field is in danger. By Tuesday night traders should have a good idea of the eventual outcome and prices will react accordingly. If the hurricane hits northern Mexico prices should drop sharply unless serious damage to Mexican oil installations is reported.

Gasoline demand has slowed considerably now that summer is nearly over and kids are going back to school. There will be a 30-45 day period where overall crude demand will slow before accelerating into the heating oil season. This slack demand period will see gasoline prices fall dragging down the price of oil.

If the hurricane misses the oil fields the price of oil could easily fall to $65 over the coming weeks. If the oil fields are hit then we could see $75 by the end of the week and even higher if the damage is severe.

Hurricane Dean Wind Forecast

Dean 5-day Track

On Thursday the price of oil fell -$4 from the Wednesday highs due mainly to the dumping of positions by hedge funds facing massive redemption requests. August 15th was the deadline for notices for redemptions by investors wanting to withdraw money from hedge funds potentially exposed to the debt wreck. Reportedly many funds were experiencing redemption requests of historic proportions.

Those funds were faced with the need to raise substantial amounts of cash and they were unable to sell many of their various debt positions. When you need cash fast you are forced to sell whatever you have that is liquid. In this case that means stocks and commodities. With many funds up strongly on their energy positions this was the perfect opportunity to take profits in those positions rather than close losing positions in a very thin market.

When I saw this happening on Thursday and oil prices firming at $70 I sent an email to everyone to exit our short positions in the XLE, TSO and CVX. While I think we will see lower lows in each of those stocks I did not want to get trapped by a sudden northward turn by Dean. We took our profits at almost the exact bottom of the drop and now we are ready to react to whatever Dean throws at us. I did add another XLE put to the watch list.

The dramatic market drop also gave us entry points on several of our watch list candidates. I believe the -$11 drop in NOV on Thursday was a gift. I just wish it had happened on a couple other stocks as well. I still believe we will see lower lows so we will probably get another chance at the rest of the list.

We received this reader email last week:

I find your articles and commentary to be very informative. However, I can't seem to get any trades. Is that because of the current environment? I would like to continue as a subscriber but I am not able to measure any terms of profitability without any trades.

This is NOT a trading newsletter. This is an investing newsletter with a primary focus on the energy sector. If you are looking for trades every week then you need to focus on the Option Investor or Premier Investor newsletters. They give new trades on a daily basis.

Because this newsletter primarily focuses on the energy sector there will be periods where there are no new trades. The energy sector is cyclical driven by supply and demand cycles. We attempt to capitalize on these cycles to produce profits. We have exited nearly 20 positions over the last couple months that we put on during the last cycle with most producing more than a 100% profit. A new energy cycle is almost upon us and we are mostly in cash today in order to take advantage of the seasonal buying opportunity over the next 6-8 weeks.

Readers over the last month should be aware that we exited our longs at almost the exact top in oil in late July. We entered three short positions at almost the exact top and closed them at $70 last week. The LEAPS newsletter capitalizes on these cycles rather than force a trade every week.

For any other free trial readers you can always check the LEAPS performance by reading the past newsletters on the website. Just click the weekly issues and look at either the portfolio graphic for that week or the "closed plays" section. I am going to produce a summary sheet over the next couple weeks of all the plays over the last year and then keep it updated for future reader reference.

Another email:

I would like to start writing short term call options against my Leaps, for extra income, I would appreciate if you could describe the ups and downs about this strategy. I read that I cannot write ITM or ATM short call options against my Leaps is this correct?

Writing covered calls against your LEAPS is a good way to capture extra income but it is also very dangerous to do on a regular basis. When you write a short call against the LEAP you always take the chance of having that short call exercised and your LEAP position closed to cover it. Normally this is a losing proposition for you. This may be why you read that writing ITM or ATM calls were not an option. You are almost guaranteed of having your LEAP position closed by writing ITM calls. If you are going to use this strategy it is best to write out of the money calls and setting OTM stop losses on those calls to avoid having your position exercised.

Volatility Ahead

With the current broad market pressures, hurricane Dean and the peak of hurricane season still ahead on Sept 10th the energy sector will be volatile for the next 4-6 weeks. We welcome this volatility as an opportunity to enter some strong positions at bargain prices. Readers should be prepared to enter multiple long-term positions during this high volatility period.


September Crude Futures Chart - Daily

September Natural Gas Futures Chart - Daily

September Gasoline Futures Chart - RBOB Daily

 


Changes in Portfolio

New Energy Plays

See Watch List


New Non-Energy Plays

See Watch List


Dropped Plays

New Watch List Plays Triggered
BHP
$54.80
BHP Billiton ** Stop Loss $47.50 **
NOV $108.50 National Oilwell Varco ** Stop Loss $95.00 **
CFC $21.32 Countrywide Financial ** Stop Loss $15.00 **
CCJ $36.42 Cameco ** Stop Loss $30.00 **

Portfolio Listing & Top Picks


New Plays

Most Recent Plays

BHP - $54.80 - BHP Billiton ** Stop Loss $47.50 **

NHP has declined from nearly $70 to hit $50 on Thursday. That was enough to trigger our entry at $55. The 200-day average is currently $49 and I put the stop just under that level.

Company Info:

BHP Billiton Limited is a diversified resources group. The Company has seven business units, or Customer Sector Groups: Petroleum, which explores for, produces, processes and markets hydrocarbons, including oil, gas and liquefied natural gas; Aluminium, which explores for and mines bauxite, and processes and markets aluminium and alumina; Base Metals, which explores for, mines, processes and markets copper, silver, zinc, lead, uranium and copper by-products, including gold and molybdenum; Carbon Steel Materials, which explores for, mines, processes and markets metallurgical coal, iron ore and manganese used in the production of carbon steel; Diamonds and Specialty Products, which explores for and mines diamonds and titanium minerals; Energy Coal, which explores for, mines, processes and markets energy coal for use in electricity generation, and Stainless Steel Materials, which explores for, mines, processes and markets nickel, which is used in the production of stainless steel.

Breakdown target: $55 hit 8/15/07

Position: 2010 $70 LEAP Call LPH-AN @ $9.00

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

NOV - $108.50 - National Oilwell Varco ** Stop Loss $95.00 **

In an amazing bout of selling NOV plunged more than $12 on Thursday and triggered our entry at $100. I view this as a gift after the strong upward move over the last 7 months. Hopefully everyone else feels the same way and support at $100 will hold.

Company Info:

National Oilwell Varco, Inc. (NOV) is a worldwide provider of equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration services to the upstream oil and gas industry. The Company operates in three segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services. The Rig Technology segment designs, manufactures, sells and services complete systems for the drilling, completion and servicing of oil and gas wells. The Petroleum Services & Supplies segment provides a variety of consumable goods and services used to drill, complete, remediate and workover oil and gas wells, service pipelines, flowlines and other oilfield tubular goods. The Distribution Services segment provides maintenance, repair and operating supplies, and spare parts. In March 2006, NOV acquired Soil Recovery A/S. In November 2006, it acquired Rolligon Ltd. In December 2006, it acquired 87% of NQL Energy Services Inc.

Breakdown target: $100 hit 8/16/07

Position: FEB $110 Calls NOV-BB @ $9.70

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

CFC - $21.32 - Countrywide Financial ** Stop Loss $15 **

Countrywide was pummeled last week on rumors they would be forced to declare bankruptcy due to the debt wreck. They exercised their entire $11.5 million short term credit line to the surprise of the 40 bank consortium that arranged it a long time ago. The CEO said they had an additional $50 billion in available long term credit on 8/03.

I believe Countrywide has a rocky road ahead but they will come out on top once the mortgage market opens up again. They are likely to face serious layoffs and a sharp reduction in revenue as they revert to primarily agency qualified paper.

Company Info:

Countrywide Financial Corporation (Countrywide), incorporated on February 6, 1987, through its subsidiaries, is engaged in mortgage lending and other real estate finance-related businesses, including mortgage banking, banking and mortgage warehouse lending, dealing in securities and insurance underwriting. The Company has five segments: Mortgage Banking, which originates, purchases, sells and services non-commercial mortgage loans; Banking, which takes deposits and invest in mortgage loans and home equity lines of credit; Capital Markets, which operates an institutional broker-dealer that primarily specializes in trading and underwriting mortgage-backed securities; Insurance, which offers property, casualty, life and disability insurance as an underwriter and as an insurance agency, and Global Operations, which licenses technology to mortgage lenders in the United Kingdom. During the year ended December 31, 2006, Mortgage banking accounted for 48% of the Company's pre-tax earnings.

Breakdown target $20.00 hit 8/15/07

Position: 2010 $30 LEAP Call YJD-AF @ $7.00

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

CCJ - $36.42 - Cameco ** Stop Loss $30 **

Strong earnings, major producer, the world is consuming more uranium than is currently produced. CCJ reported earnings on July 30th that showed an increase in revenue of +74% and earnings of +181% for the quarter. The stock has been under pressure since the hedge fund crisis caused the selling of some uranium stockpiles and a drop in uranium prices for the first time in 46 months. This is only temporary since more uranium is used than is actually produced. Stockpiles from the nuclear arms race period are expected to be depleted within two years and prices will rocket higher when that happens.

Company Info:

Cameco Corporation (Cameco) is primarily engaged in the exploration for and the development, mining, refining and conversion of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries. The Company has a 31.6% interest in Bruce Power L.P. (BPLP), which operates the four Bruce B nuclear reactors in Ontario. The Company wholly owns Zircatec Precision Industries, Inc., whose primary business is the fabrication of nuclear fuel bundles. Cameco's 52.7% subsidiary Centerra Gold Inc. (Centerra) is involved in the exploration for and the development, mining and sale of gold. Cameco has four segments: uranium, fuel services, nuclear electricity generation and gold. In June 2006, the Company acquired a 19.5% interest in UNOR Inc, whose principal properties are 226 mineral claims in northwestern Nunavut on the Hornby Basin.

Breakdown target: $35 Hit 8/16/07

Position: 2010 $50 LEAP Call LTA-AJ @ $7.20


 


Play Updates

Existing Plays

CVX - $84.36 +.94 - Chevron Put *** Closed for +165% Profit ***

Chevron hit a 4-month low on Thursday at $78.25 and we closed it for a nice profit.

For initial commentary see the July 22nd newsletter.

7/23/07 Position:
Dec $90 Put CVX-XR @ $4.70, exit $12.50, +$7.80, (+165%)

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

TSO - $46.95 -2.35 Tesoro Put *** Closed for +117% Profit ***

Tesoro duplicated its 7-month low on Thursday at $42.72 and we closed the play for a nice profit before a +$5 rebound.

For initial commentary see the July 22nd newsletter.

7/23/07 Position:
Nov $50.00 PUT TSO-WJ @ $3.50, exit $8.10, +4.10, (+117%)

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

XLE - $67.50 -0.22 Oil SPDR Put *** Closed for +186% Profit ***

The XLE continued to be hammered by the broader market sell off. The refiner upgrade helped it slightly as did the 200-day average. This is a long term position and we need to get into September before any major breakdown should occur.

For initial commentary see the July 15th newsletter.

Breakdown trigger: $72, hit 7/18

7/18/07 Position:
Dec $70 Put XBT-XR @ $3.00, exit $8.60, +5.60 (+186%)

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

HOS - $37.64 -5.07 - Hornbeck Offshore *** Stopped $39.50 ***

Hornbeck was knocked for a -$10 loss over three days as support finally crumbled under the market pressure.

For initial commentary see June 10th newsletter

Earnings: August 2nd

Breakdown trigger: $39.00 hit 6/08

Position: 2009 $40 LEAP Call ZIG-AH @ $8.00, exit $7.00 8/16

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

CHK $33.55 -0.47 - Chesapeake Energy ** Stop $29.00 **

This is an insurance put we bought really cheap several months ago when CHK was a long LEAP position. We were stopped on the LEAP but kept the put in play.

CHK continued to slide despite a bounce in gas prices. Our exit may be coming soon.

Insurance put:
Oct $30 Put CHK-VF @ 90 cents. Profit stop $29


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

RIMM - $220.52 +13.52 - Research in Motion

RIMM rebounded +$35 from its Thursday low of $185 to put it right back in the prior congestion range. Plenty of time and no hurry to exit.

For initial commentary see the July 1st newsletter.

Earnings schedule: Sept 27th.

Breakdown trigger: $168.00 hit 6/25

Call spread:
Position: LONG 2009 $180 LEAP Call VHO-AP @ $32.60
Position: SHORT 2009 $230 LEAP Call VHO-AF @ $10.47

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

BSC $118.20 +8.00 - Bear Stearns *** Stop Loss $97 ***

BSC was one of the most volatile stocks for the week with a $25 swing from low to high. This was the second week in August that BSC had a $25 range. The worst could be behind BSC and we got in at the bottom of the first dip and a 2-year low. Assuming nothing new appears to muddy the water we should be in good shape.

Breakdown target $100 hit 8/06/07

Position: 2010 $120 LEAP Call YBO-AD @ $25.60
 


Leaps Trader Watch List

price if Dean misses the oil patch. With the current market volatility we could also see some market driven declines. Better to be locked and loaded than waiting on the sidelines. I doubt we will ever fill all the entries but those we do get will be at the right price. ** Note that the XLE is a new PUT entry.

Dropped Entries

None


New Watch List Entries
TSO Tesoro
PTR PetroChina
XOM ExxonMobil
CVX Chevron
CNQ Canadian Natural Resources
PBR Petrobras
DO Diamond Offshore
CLB Core Labs
FXI China Ishares (includes CEO, SNP and PTR)
SPW SPX Corp
XLE Energy Spyder *** PUT ***

Current Watch List

UPL - Ultra Petroleum

Still looking for another drop. Maintain the entry target.

This is an unbelievable opportunity in progress. For some reason UPL has fallen out of favor even though production is rising and they are the lowest cost producer in North America. Cash flow in Q1 increased +15% on a +42% increase in production to record levels. They closed 2007 with more than 10 TCF of gas reserves in Wyoming and Utah. They have a 17-year drilling program on those assets alone. They raised guidance for 2007 to 114 BCFE for a +24% increase over 2006. Estimates for 2008 are 135 BCFE and 160 BCFE for 2009. They added $250 million to a $1 billion share repurchase agreement on April 30th. This company is printing money but suddenly the stock has fallen out of favor with investors. I would love to be a buyer at $50. Falling gas prices may give us a chance.

Company Info:

Ultra Petroleum Corp. (Ultra) is an oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and gas properties. The Company's operations are primarily in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. As of December 31, 2006, Ultra owned interests in approximately 147,917 gross (79,566 net) acres in Wyoming covering approximately 230 square miles. The Company owns working interests in approximately 464 gross producing wells in this area and is an operator of 50% of the 464 gross wells. During the year ended December 31, 2006, domestic production was approximately 89.5% of the Company's total oil and natural gas production on a thousand cubic feet of natural gas equivalent (Mcfe) basis and 99% of the Company's estimated net proved reserves were domestic on a Mcfe basis.

Breakdown target: $50

Buy Jan 2009 $60 LEAP Call OZH-AL

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

JEC - Jacobs Engineering Group

Jacobs has been on a very strong growth path and the recent market weakness has knocked it back into range. It has oil and gas exposure but it not an oil and gas company.

Company Info:

Jacobs Engineering Group Inc. is a professional services firm that focuses on providing a range of technical, professional and construction services. It provides project services, which include engineering, design, architectural, and similar services; process, scientific, and systems consulting services; operations and maintenance services, and construction services, which include direct-hire construction and construction management services. It concentrates its services on selected industry groups and markets, including oil and gas exploration, production and refining; programs for various federal governments; pharmaceuticals and biotechnology; chemicals and polymers; buildings, which includes projects in the fields of healthcare and education, as well as civic, governmental and other buildings; infrastructure and technology and manufacturing. In April 2006, its Canadian subsidiary acquired Techna-West Engineering Limited. In October 2006, it acquired W.H. Linder & Associates, Inc.

No LEAPS

Breakdown target: $55

Buy JAN 2008 $60 Call JEC-AL

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

VLO - Valero Energy

Looking to buy Valero cheap on the fall dip.

Company Info:

Valero Energy Corporation owns and operates 18 refineries located in the United States, Canada and Aruba that produce refined products, such as reformulated gasoline blendstock for oxygenate blending, gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur and ultra-low-sulfur diesel fuel, and oxygenates (liquid hydrocarbon compounds containing oxygen). It also produces conventional gasolines, distillates, jet fuel, asphalt, petrochemicals and other refined products. It markets branded and unbranded refined products on a wholesale basis in the United States and Canada through a bulk and rack marketing network. It sells refined products through a network of approximately 5,800 retail and wholesale branded outlets in the United States, Canada and Aruba. During the year ended December 31, 2006, it sold all of its ownership interest in Valero GP Holdings, LLC. In July 2007, the Company sold its Lima, Ohio refinery to Husky Energy Inc.

Breakdown target: $55

BUY 2010 $70 LEAP Call YPY-AN

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

COP - Conoco Phillips

I hesitate to add Conoco because of its Russian LUKOIL exposure but the company is doing everything else right. Now that it is out of Venezuela it should be more aggressive with other opportunities.

Company Info:

ConocoPhillips (ConocoPhillips) is an international, integrated energy company. The Company's business is organized into six segments. Exploration and Production segment primarily explores for, produces and markets crude oil, natural gas and natural gas liquids on a worldwide basis. Midstream segment gathers, processes and markets natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, primarily in the United States and Trinidad. Refining and Marketing segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia. LUKOIL Investment segment consists of its equity investment in the ordinary shares of OAO LUKOIL (LUKOIL). The Chemicals segment manufactures and markets petrochemicals and plastics on a worldwide basis. Emerging Businesses segment includes the development of new technologies and businesses outside the Company's normal scope of operations.

Breakdown target: $70

Buy 2010 $80 LEAP Call YRO-AP

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

MRO - Marathon Oil

On July 31st Marathon announced its purchase of Western Oil Sands for $5.5 billion. This will be an immediate increase in production for Marathon of 31,000 bpd. The acquisition gives them 20% interest in the Athabasca Oil Sands Project in Alberta. The other partners are Shell 60% and Chevron 20%.

Company Info:

Marathon Oil Corporation (Marathon) is engaged in exploration, production and marketing of crude oil and natural gas worldwide. The Company operates in three segments: Exploration and Production (E&P), which explores for, produces and markets crude oil and natural gas on a worldwide basis; Refining, Marketing and Transportation (RM&T), which refines, markets and transports crude oil and petroleum products, primarily in the Midwest, the upper Great Plains and southeastern United States, and Integrated Gas (IG), which markets and transports products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, on a worldwide basis, and is developing other projects. During the year ended December 31, 2006, Marathon completed leasehold acquisitions totaling approximately 200,000 acres in the Bakken Shale oil play. In July 2006, it completed a natural gas leasehold acquisition in the Piceance Basin of Colorado, in Garfield County in the Greater Grand Valley field complex.

Breakdown target: $45

Buy 2010 $60 LEAP Call WXM-AL

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

SLB - Schlumberger

SLB posted blowout earnings on its global services business and had only good things to say about the future.

Company Info:

Schlumberger Limited (Schlumberger) is an oilfield service company supplying a range of technology services and solutions to the international petroleum industry. It consists of two business segments: Schlumberger Oilfield Services and WesternGeco. Schlumberger Oilfield Services is an oilfield services company supplying a range of technology services and solutions to the international oil and gas industry. WesternGeco, owned by Schlumberger and Baker Hughes, is an advanced surface seismic company. Schlumberger's products and services include the evaluation and development of oil reservoirs (controlled digging, pumping and testing services), well construction and production consulting, and sale of software programs. The Company also offers storage tank and seismic monitoring services. Schlumberger Limited is headquartered in Paris, France.

Breakdown target: $80.00

Buy 2010 $90 LEAP Call WUB-AR

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

TSO - Tesoro

Company Info:

Tesoro Corporation (Tesoro) is an independent petroleum refiner and marketer with two operating segments: refining, which is engaged in refining crude oil and other feedstocks at its six refineries in the western and mid-continental United States and selling refined products in bulk and wholesale markets (refining), and retail, which is engaged in selling motor fuels and convenience products in the retail market through its 460 branded retail stations in 18 states. Through its refining segment, the Company produces refined products, primarily gasoline and gasoline blendstocks, jet fuel, diesel fuel and heavy fuel oils for sale to a variety of commercial customers in the western and mid-continental United States. Tesoro's retail segment distributes motor fuels through a network of retail stations, primarily under the Tesoro and Mirastar brands.

Breakdown trigger: $40

Buy 2010 $50 LEAP Call LGC-AJ

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

PTR - PetroChina

Company Info:

PetroChina Company Limited is engaged in a range of petroleum-related activities through its four business segments: Exploration and Production, Refining and Marketing, Chemicals and Marketing, and Natural Gas and Pipeline. The activities include the exploration, development, production and sales of crude oil and natural gas; the refining, transportation, storage and marketing of crude oil and petroleum products; the production and sales of basic petrochemical products, derivative chemical products and other chemical products, and the transmission of natural gas, crude oil and refined products, and the sales of natural gas. PetroChina Company Limited was established as a joint stock company as part of the restructuring of the China National Petroleum Corporation (CNPC). On December 28, 2006, the Company acquired a 67% interest in PetoKazakhstan Inc. from CNPC International Limited, a subsidiary of CNPC.

Breakdown target: $120

Buy 2010 $140 LEAP Call LJC-AH

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

XOM - ExxonMobil

I caved in and added Exxon to the list because of their performance in 2007. With 6 billion shares outstanding it takes a lot to move their stock price but they added +$30 since Sept-06.

Company Info:

Exxon Mobil Corporation (ExxonMobil) is an international oil and gas company. ExxonMobil operates facilities or market products in many countries, and explores for oil and natural gas on six continents. ExxonMobil is involved in the exploration and production of crude oil and natural gas; the manufacture of petroleum products, and the transportation and sale of crude oil, natural gas and petroleum products. ExxonMobil is a manufacturer and marketer of commodity and specialty petrochemicals, and also has interests in electric power generation facilities. In addition, the Company conducts research programs in support of these businesses.

Breakdown trigger: $78

Buy 2010 $90 LEAP Call WXO-AR

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

CVX - Chevron

Company Info:

Chevron Corp. (Chevron), manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and foreign subsidiaries that engage in fully integrated petroleum operations, chemicals operations, mining operations of coal and other minerals, power generation and energy services. Exploration and production (upstream) operations consist of exploring for, developing and producing crude oil and natural gas, and also marketing natural gas. Refining, marketing and transportation (downstream) operations relate to refining crude oil into finished petroleum products; marketing crude oil and the many products derived from petroleum, and transporting crude oil, natural gas and petroleum products by pipeline, marine vessel, motor equipment and rail car. Chemical operations include the manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant oil additives.

Breakdown trigger: $77

Buy 2010 $90 LEAP Call WCH-AR

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

CNQ - Canadian Natural Resources

Company Info:

Canadian Natural Resources Limited (CNRL) is an independent crude oil and natural gas exploration, development and production company head-quartered in Calgary, Alberta, Canada. The Company's operations are focused in North America, largely in Western Canada, the United Kingdom portion of the North Sea and Offshore West Africa. In November 2006, the Company completed the acquisition of Anadarko Canada Corporation from Anadarko Petroleum Corporation. The Company's crude oil and natural gas activities are conducted in three geographic segments: North America, North Sea and Offshore West Africa. These activities relate to the exploration, development, production and marketing of crude oil, natural gas liquids and natural gas. The Company's Horizon Project has been classified as a separate segment. Midstream activities include the Company's pipeline operations and an electricity co-generation system.

Breakdown Trigger: $55

Buy 2010 $70 LEAP Call YJB-AN

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

PBR - Petrobras

Company Info:

Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a wholly owned enterprise of the Brazilian Government, which is responsible for all hydrocarbon activities in Brazil. The Company is engaged in a range of oil and gas activities. Petrobras operates in six segments: exploration and production, supply, distribution, gas and power, international and corporate. In June 2007, Petrobras announced that it completed transfer of all of the shares of Petrobras Bolivia Refinancion S.A. to YPF S.A. In March 2007, the Company, Braskem S.A. and Ultrapar Participacoes S.A. announced the acquisition of Grupo Ipiranga. In September 2006, the Company announced the closing of the acquisition by Petrobras America, Inc. (PAI), its wholly owned subsidiary in the United States Gulf of Mexico, of 50% of Pasadena Refining System Inc. In June of 2006, it completed the acquisition of 66% of Gaseba Uruguay-Grupo Gaz de France S.A.

Breakdown Trigger: $50

Buy 2010 $60 LEAP Call YMO-AL

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

DO - Diamond Offshore

Company Info:

Diamond Offshore Drilling, Inc. (Diamond Offshore) provides contract drilling services to the energy industry worldwide and is also engaged in deepwater drilling with a fleet of 44 offshore drilling rigs. The Company's fleet consists of 30 semisubmersibles, 13 jack-ups and one drillship. The Company offers a range of services worldwide in various markets, including the deep water, harsh environment, conventional semisubmersible and jack-up markets. The Company provides offshore drilling services to a customer base that includes independent oil and gas companies and government-owned oil companies.

Breakdown Trigger: $86

Buy 2010 $100 LEAP Call WFJ-AT

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

CLB - Core Labs

Company Info:

Core Laboratories N.V. (Core Lab) is a provider of reservoir description, production enhancement and reservoir management services to the oil and gas industry. These products and services are directed toward enabling the Company's clients to improve reservoir performance and increase oil and gas recovery from their producing fields. It has over 70 offices in more than 50 countries. Core Lab derives its revenues from services and product sales to clients in the oil and gas industry. Its reservoir optimization services and technologies are interrelated and are organized into three complementary segments: Reservoir Description, which encompasses the characterization of petroleum reservoir rock, fluid and gas samples; Production Enhancement, which includes products and services relating to reservoir well completions, perforations, stimulations and production, and Reservoir Management, which combines and integrates information from reservoir description and production enhancement services.

Breakdown Trigger: $90

Buy 2010 $100 LEAP Call LYM-AT

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

FXI - China Ishares (includes CEO, SNP and PTR)

ETF Info:

iShares FTSE/Xinhua China 25 Index Fund (the Fund) is an index fund that seeks investment results that correspond generally to the price and yield performance of the FTSE/Xinhua China 25 Index (the Index). The Index is designed to represent the performance of the largest companies in the Chinese equity market that are available to international investors. The Index consists of 25 of the largest and most liquid Chinese companies. Securities in the Index are weighted based on the total market value of their shares. Each security in the Index is a constituent of the FTSE All-World Index. All of the securities in the Index trade on the Hong Kong Stock Exchange. The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. From its inception, on October 5, 2005, through July 31, 2005, the Fund returned 14.57%, while the Index returned 15.3%.

Breakdown Trigger: $111

Buy 2009 $120 LEAP Call VHF-AD

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

SPW - SPX Corp

Company Info:

SPX Corporation is a global multi-industry manufacturing company. The Company provides flow technology, test and measurement products and services, thermal equipment and services, and industrial products and services. The Company's infrastructure-related products and services include wet and dry cooling systems, thermal service and repair work, heat exchangers and power transformers into the global power market. The Company has four business segments: Flow Technology, Test and Measurement, and Thermal Equipment and Services, and Industrial Products and Services. In October 2006, the Company sold its Dock Products business to management of Dock Products and an affiliate of Wynnchurch Capital, Ltd. SPX Dock Products, based in Carrollton, Texas. In December 2006, the Company acquired Aktiebolaget Custos within its Flow Technology segment. In April 2007, the Company completed the sale of its Contech business unit to Marathon Automotive Group, LLC.

Breakdown Trigger: $75

Buy 2010 $90 LEAP Call YSW-AR

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

XLE - Energy Spyder *** PUT ***

If we do get a bounce on hurricane Dean I want to reenter the put position in anticipation of another decline to a lower low.

ETF Info:

Energy Select Sector SPDR Fund (the Fund) seeks to replicate the total return of the Energy Select Sector of the S&P 500 Index. The Fund utilizes a passive or indexing investment approach and attempts to approximate the investment performance of the Energy Select Sector Index, by investing in a portfolio of stocks that seek to replicate the Energy Select Sector Index. The Energy Select Sector Index includes companies from oil, gas and consumable fuels, and energy equipment and services industries. Energy companies in the Energy Select Sector Index develop and produce crude oil and natural gas, and provide drilling and other energy resources production and distribution-related services.

Breakout Trigger: $69.50

Buy Dec $67 Put GQQ-XO
 


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.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives