Option Investor
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Weekly Newsletter, Saturday, 09/15/2007

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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

#$%&*^!!!!

There is no sanity left in the energy market. Oil surged on the suddenly appearing Hurricane Humberto and hit $80 for three consecutive days. It appears to have found some serious resistance at that level and there was no shortage of sellers whenever the contract peaked over that threshold. They did not chase it lower, having learned a series of painful lessons over the last couple weeks. Every dip was bought and bought aggressively.

I think the bullish momentum players have run out of rope. Trading terminates on the October contract on Wednesday. Those hoping to hold on to their positions in hopes of tropical storm Ingrid turning west or another massive drop in crude inventories are rapidly reaching the point where they either take profits to avoid the rush or get caught in a serious downdraft in the closing hours of the contract. At some point reason should resurface and logical decisions appear. However, logic and reason make only brief appearances in the commodities markets a few days per month.

There is no economic or fundamental support for oil prices at this level. It is strictly the only game in town as we await the Fed decision and earnings on the brokers and every available player has crowded up to the table.

Last Tuesday OPEC teased the markets with word games switching to "production" instead of "quotas" and ignoring the prior targets. We know that the prior quota was 25.8 mbpd for the OPEC 10 countries. The remaining two OPEC members, Iraq and Angola, have no quotas. The OPEC-10 were actually producing 26.7 mbpd or +900,000 barrels over their quotas. The total production for all 12 OPEC members was 30.3 mbpd.

After the meeting where they decided to officially add +500,000 bpd to the market they announced the OPEC-10 were going to produce 27.2 mbpd for an increase of 500K. Reporter after reporter asked any official, delegate or oil minister that would step in front of a microphone "what happened to the quota." They squirmed and fidgeted and mumbled in broken English "we are going to add 500 kbpd to production." Reporters trying to be cute would say that means your quota is now 26.3 mbpd, knowing full well what the answer would be. Invariably they would answer, "We are increasing our production by 500 kbpd to 27.2 mbpd. Basically they were trying to ignore the 900,000 bpd of quota cheating and convince the market that they were only adding a minor amount of oil to the total. In effect they are right but saying we are ONLY adding 500 kpbd to our output seems like a lot less oil than saying we are raising our quota by +1.4 mbpd. They were hoping the impact on prices would be minimal with a +500K gain compared to having the +1.4 mbpd number repeated a million times in the news cycle. Evidently those traders who can't add took their comments at face value and feared a shortage was just around the corner. Why that apparent shortage was only in the October contract expiring in just days is unknown to me. The high in the November contract last week was only $79 with the high $78s getting the most volume.

Since oil inventories are just below 10-year highs I don't see the problem. OPEC said the new production target would become effective on November 1st but everyone with a brain realizes they became effective the minute the camera lights were turned off and the microphones unplugged. When you consider load and transit time it does take 30 days to get new production from the Middle East to the U.S. but we are only talking 500K per day or half a tanker and all of that oil is not coming to us. This is all a shell game with an extra helping of smoke and mirrors to cloud the issue. I am a Peak Oil believer but this is not Peak Oil. It is simply a cleverly played hand by OPEC and they are being well rewarded for their skillful game.

We were stopped out on our XLE put on Thursday and while I seriously wanted to email everyone again and tell them to hold the position I could not in good conscience make that call. I put stops on plays because the market is not sane and logical. It has been a known fact for decades that the market can remain insane far longer than we can remain liquid. We must honor those stops under the assumption that there is something we don't know that is making the position move against us. Capital preservation should be our number one directive with profitable plays secondary. Now that I have said that I will also tell you I am putting the XLE play back in the wish list but with different parameters. Eventually this market is going to crack and we want to be there when it does.

Unfortunately the last two weeks of gains on most energy stocks appear to have taken them way out of range of our entry targets. At this point I don't know if they will come back but I definitely know we should not chase them. Every sector cycles several times a year and energy is no exception. We will just have to wait for it to cycle and then manage our entries during the cycle. I still believe oil will return to $70 or even lower this fall but that belief and $4 will not even get you a decent combo meal at McDonalds.

Our non-energy plays of BSC and CFC finally found a bottom this week, or at least I hope it is a bottom. Countrywide arranged another $12 billion in financing and business volumes for closings in August were much stronger than anyone expected. I think they are now out of the woods and anyone holding off on an entry should probably make it now. Bear Stearns rebounded +$12 off its lows for the week on news a major investor had taken nearly a $1 billion position in BSC to become the largest shareholder. This expression of confidence helped lift them out of their downward spiral. Earnings for BSC are Thursday.

Good luck!


October Crude Futures Chart - Daily

November Crude Futures Chart - Daily

October Natural Gas Futures Chart - Daily

October Gasoline Futures Chart - RBOB Daily

 


Changes in Portfolio

New Energy Plays
XLE
$72.50 Energy Spyder ** PUT **

New Non-Energy Plays
IWM
$78.00 Russell 2000 iShares *** Stop Loss $76.00 ***

Dropped Plays
NOV National Oilwell Varco
XLE Energy SPDR

New Watch List Plays Triggered
None

Portfolio Listing & Top Picks


New Plays

Most Recent Plays

XLE $72.50 Energy Spyder *** PUT ***

This is a new play on the XLE and the potential for a sharp drop in oil prices. I did not put it in the watch list because I fully expect it to be triggered on Monday/Tuesday.

Breakdown Trigger: $71.35

Buy: Dec $70 Put XBT-XR


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New Non-Energy Plays
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I should have added Goldman last week when I first mentioned it. With it up +$10 for the week the options have already become overpriced.

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IWM - $78 - Russell 2000 iShares *** Stop Loss $76.00 ***

I believe next week will be a turning point in the market and I also believe that turn will be higher. The Russell has under performed the major averages for weeks and small caps should be the preferred choice as fund managers position their portfolios for year end.

Company Info:

iShares Russell 2000 Index Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the Russell 2000 Index (the Index). The Index measures the performances of the small capitalization sector of the United States equity market. The Index includes approximately 8% of the market capitalization of all publicly traded United States equity securities. The Index is a subset of the Russell 3000 Index, and serves as the underlying index for the Russell 2000 Growth and Value Index series. The Index is a capitalization-weighted index of the approximately 2000 smallest companies in the Russell 3000 Index. The Fund uses a representative sampling strategy in seeking to track the Index. iShares Russell 2000 Index Fund's investment advisor is Barclays Global Fund Advisors.

BUY Jan $80 Call IOW-AB

 


Play Updates

Existing Plays

XLE $72.50 +2.24 - Energy Spyder *** Stopped $72 ***

The XLE Put play was stopped on Wednesday at $72. I wanted to stay in but in hindsight it was the right move. We never know what the future holds and when a play goes against us we need to exercise the discipline to exit.

Breakout Trigger: $69.50 Hit 8/31

Position:
Dec $67 Put XBT-XO @ $2.55, exit $2.10, -.45
Dec $67 Put GQQ-XO @ $2.70, exit $2.25, -.45

GQQ-XO is a quarterly strike listed by mistake.

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UPL $56.33 +2.64 - Ultra Petroleum *** Stop Loss $52 ***

No news on UPL but gas prices and stock prices rose last week on news that CHK and STR were curtailing production until prices improved. There is no reason to sell gas for low prices simply because there is no place to store it. The major producers are cutting back to give the storage facilities time to deplete some storage and keep prices level.

Ultra returned to the top of their recent range and well above our stop.

Prior comments:

They have identified three more producing zones at their Pinedale field that could substantially increase production. They also expect to receive some further downsizing on well placement allowing them to drill 2-4 times as many wells. They also expect to receive permission from the State of Wyoming to drill during the winter months effectively giving them an extra quarter or more of production per year. Now, we just need winter to show with some teeth this year and deplete the 3 tcf of gas currently in storage.

Ultra Petroleum presentation

Breakdown target: $52.50 Hit 8/30

Position: Jan 2009 $60 LEAP Call OZH-AL @ $8.00

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CHK $34.95 +0.96 Chesapeake Energy

CHK continues to improve on news of their upcoming $1 billion limited partnership sale covering some natural gas assets. CHK also plans to sell $2 billion in other assets and reiterated its strong hedging program of 80% of production for the next two years in the $6-$8 range. S&P reaffirmed their credit rating a BB.

CHK was recently upgraded to 5 stars by Morningstar.

Link to Enercom presentation

Position: 2010 $35 LEAP Call WZY-AG @ $6.60 ** No Stop on LEAP **

Insurance put:
Oct $30 Put CHK-VF @ 90 cents. Profit stop $28

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HP $33.15 +1.32 Helmerich & Payne *** Stop Loss $27.50 ***

HP continued to creep higher and is about to break back over the 100-day average. No news other than a great looking chart.

Enercom presentation here

Position: Jan 2009 $35 LEAP Call ZQA-AG @ $4.50

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HERO $25.49 +1.80 Hercules Offshore ** Stop Loss $24.00 **

Hercules finally found some traction and moved to a new 4-week high. Not quite a breakout yet but at least the turn was positive. News that the CEO was buying shares in the open market provided some of the lift. Maintain the stop at $24.

Enercom presentation

Position: 2008 April $30 Call HIQ-DF @ $3.00

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GLBL $24.71 +0.26 Global Industries ** Stop Loss $18.50 **

SSlower than molasses in January but the trend is still positive. There was no news.

Enercom presentation

Position: 2008 March $25 Call GQO-CE @ $3.30

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BHP - $65.94 +1.76 BHP Billiton ** Stop Loss $47.50 **

BHP continues to be a strong performer and hit a new two-month high on Thursday. No specific news but BHP is mentioned positively in some article nearly every day.

Breakdown target: $55 hit 8/15/07

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

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NOV - $133.58 +3.72 National Oilwell ** Stopped 127.00 **

NOV hit our trailing stop on Monday and took us out for nearly a $20 profit on the option. No complaints here and we will get back in after the 2:1 split on the 28th.

2:1 split date: Sept 28th.

Breakdown target: $100 hit 8/16/07

Position: FEB $110 Calls NOV-BB @ $9.70 exit 9/10 $28, +18.30

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CCJ - $44.68 +4.11 Cameco ** Stop Loss $30 **

CCJ exploded on the news of its buyback and a deal to acquire an interest in Cue Capital Corp, a Paraguay explorer. CCJ also gained the right to acquire a 60% interest to develop uranium discoveries in Paraguay. CCJ also owns 53% of CenterraGold and with gold prices at multiyear highs does not hurt that value either. CCJ said last week it was going to buy back 5% of its outstanding shares or 17.7 million shares.

Breakdown target: $35 Hit 8/16/07

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


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Non-Energy Positions
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RIMM - $87.26 +6.78 - Research in Motion

No slowdown on RIMM and another new high on Thursday. RIMM will release a new version of the Pearl in mid October. The new version is said to be more consumer friendly and contain some iPhone type features. It is being marketed to the older more business oriented person that still would like some better browsing features. RBC Capital Markets called RIMM a top pick on Friday with a price target of $110.

For initial commentary see the July 1st newsletter.

Earnings schedule: Sept 27th.

Breakdown trigger: $56.00 hit 6/25

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

Call spread post-split:
Position: LONG (3) 2009 $60 LEAP Call VHO-AL @ $10.87
Position: SHORT (3) 2009 $76 LEAP Call VHO-AU @ $ 3.62

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BSC $117.19 +11.82 - Bear Stearns *** Stop Loss $97 ***

That was close. I was beginning to worry that BSC would be too close to the stop on earnings day and take us out on a volatility dip. Now $20 above the stop we should be in good shape but it would really help if they surprise to the upside or at least don't screw up to bad.

Earnings are Sept-13th.

Breakdown target $100 hit 8/06/07

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

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CFC - $19.42 +1.21 Countrywide Financial ** Stop Loss $15 **

A gain on Countrywide! What is the world coming to? Next thing you know oil will be over $80. The bounce came on the news that CFC had arranged another $12 billion in financing and had funded $34 billion in loans in August. That was -17% below August 2006 but way above what anyone expected to be done. They also reported $62 billion in the pipeline. I would bet the bottom is now behind us.

Breakdown target $20.00 hit 8/15/07

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


Leaps Trader Watch List

Dropped Entries

None


New Watch List Entries
NOV
National Oilwell Varco

Current Watch List

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: $64.00

Buy APR 2008 $70 Call JEC-DN

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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: $62.50

BUY 2009 $70 LEAP Call VHB-AN

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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: $78

Buy 2009 $80 LEAP Call OJP-AP

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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: $51

Buy 2009 $60 LEAP Call VXM-AL

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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: $90.00

Buy 2009 $100 LEAP Call VWY-AT

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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: $45

Buy 2009 $50 LEAP Call ZGC-AJ

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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: $130

Buy 2009 $150 LEAP Call ZJK-AJ

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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: $83

Buy 2009 $90 LEAP Call ODU-AR

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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: $83

Buy 2009 $90 LEAP Call VCH-AR

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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: $66.00

Buy 2009 $70 LEAP Call OKR-AN

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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: $58

Buy 2009 $60 LEAP Call VDW-AL

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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: $95

Buy 2010 $100 LEAP Call VCT-AT

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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: $104

Buy 2009 $110 LEAP Call ZYM-AB

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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: $130

Buy 2009 $150 LEAP Call VHF-AZ

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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: $80

Buy 2009 $90 LEAP Call OWM-AR

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APA - Apache Corporation

Apache was upgraded to 5 stars by Morningstar in late August.

Company Info:

Enercom presentation

Apache Corporation is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. In North America, the Company's exploration and production interests are focused in the Gulf of Mexico, the Gulf Coast, East Texas, the Permian Basin, the Anadarko Basin and the Western Sedimentary Basin of Canada. It has interests in onshore Egypt, offshore Western Australia, offshore the United Kingdom in the North Sea (North Sea), and onshore Argentina. Its segments are the United States, Canada, Egypt, Australia, the North Sea and Other International. The Company also holds interests in many of its United States, Canadian and other international properties through operating subsidiaries, such as Apache Canada Ltd., DEK Energy Company (DEKALB), Apache Energy Limited (AEL), Apache International, Inc. and Apache Overseas, Inc. On January 6, 2006, the Company completed the sale of its 55% interest in the deepwater section of Egypt's West Mediterranean.

Breakdown trigger: $75

Buy 2009 $80 LEAP Call OWF-AP

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MDR - McDermott International

The 2:1 split is not being represented by some charting programs yet and there has been no attempt to buy post split. I added a breakout trigger as well.

Company info:

McDermott International, Inc. (MII) is an engineering and construction company with specialty manufacturing and service capabilities. MII is the parent company of the McDermott group of companies, which includes J. Ray McDermott, S.A. (JRMSA) and its consolidated subsidiaries; McDermott Holdings, Inc. (MHI) and its consolidated subsidiaries; McDermott Incorporated (MI), a subsidiary of MHI, and its consolidated subsidiaries; The Babcock & Wilcox Companies (B&WC), a subsidiary of MI; BWX Technologies, Inc. (BWXT), a subsidiary of B&WC, and its consolidated subsidiaries, and The Babcock & Wilcox Company (B&W), a subsidiary of B&WC, and its consolidated subsidiaries. MII is a worldwide energy services company operating in three business segments: Offshore Oil and Gas Construction, Government Operations and Power Generation Systems. In July 2007, JRMSA acquired Secunda International Limited.

Breakdown trigger: $45

Buy 2009 $50 LEAP Call OYZ-AJ

Breakout trigger: $53

Buy 2009 $60 LEAP Call OYZ-AL

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FWLT - Foster Wheeler

This is a long shot but a great entry if we can get it.

Company Info:

Foster Wheeler Ltd. operates through two business groups, which also constitute its segments: Global Engineering and Construction Group (E&C Group), and Global Power Group. The Global E&C Group designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, and chemical and petrochemical, pharmaceutical, biotechnology and healthcare facilities and related infrastructure, including power generation and distribution facilities. Global Power Group designs, manufactures, and erects steam generating and auxiliary equipment for electric power generating stations and industrial facilities worldwide. On April 7, 2006, the Company completed the purchase of the remaining 51% interest in MF Power S.r.L., a joint venture that was 49% owned by the Company's Global E&C Group prior to the acquisition.

Breakdown trigger: $110

BUY 2009 $120 LEAP Call ZHF-AY

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NOV - National Oilwell Varco

We want to enter this new position after the 9/28 2:1 split. I am putting the target at $60 to start.

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 Trigger: $60

Buy 2008 Feb $60 Call NOV-BJ
 


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