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In Play Updates and Reviews

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BHI $71.76 -7.55 - Baker Hughes *** Stopped $77 ***

Blown out on the -$10 drop from last week's highs. No specific news.

Earnings schedule: Jan 30th

Breakdown target: $80 Hit 12/17

2009 $90 LEAP Call VBH-AR @ $8.40, Exit $6.00, -2.40 1/15


DNR $24.69 -4.54 - Denbury Resources ** New Stop $24 **

No news but a massive drop accelerated by the implosion in SLB. I added a new stop.

Breakdown trigger: $53, post split $26.50 hit 12/17

Position: June $30 Call DNR-FF @ $2.25


VLO $54.03 -5.59 - Valero Energy *** Stopped $58 ***

The refinery sector was getting tons of bad press early in the week and our stop was hit on Tuesday. By the end of the week the press was turning positive again. VLO will be added to the watch list.

Entry Dec-16th @ $66.65

Position: $70 LEAP Call VHB-AN @ $9.20, $4.60 1/15


FLR $117.11 -26.68 - Fluor Corp

That was a real kick in the teeth. There was no clue a nearly $30 drop was coming the prior week or even on Monday when it was trading around $145. There was no news and it appears to be simply market related.

Remediation plan: Bull put credit spread

Buy April $110 Put FLR-PB currently $9.20
Sell Jan $170 LEAP Put XOB-MN currently $58.40

If FLR closes over $170 by January that is an additional $50 profit.

That is not a pure credit spread and for those with smaller accounts or don't have naked put capability replace the April $110 with the Jan $110 LEAP Put XOB-MB currently $19.80. There is a $10 difference in cost but the margin is regular spread margin.

If FLR closes over $170 by January that is an additional $40 profit.

Breakdown trigger: $145 Hit 12/13

Position: 2009 $160 LEAP Call XOB-AL @ $22.30


RIG $128.41 -7.98 - Transocean Inc

The two-week decline brought RIG back to our entry point and right on support of the 100-day average. Believe it or not the chart is still in an uptrend. Nothing has changed in the outlook for RIG.

Breakdown trigger: Hit 12/4 @ $130

Position: 2009 $140 LEAP Call VOI-AH @ $15.80


JEC $74.21 -14.15 Jacobs Engineering Group

No specific news but JEC was knocked for a monster loss in the market downdraft. It is now back to just under where we entered the play at $80 and right above the 200-day average. I am going to take advantage of the drop and change the option. When we entered the position there were no leaps. Now they are listing leaps. I am changing the option to the Jan-2009 LEAP to get us 10 more months of time.

Close the April 2008 $90 Call, currently $3.10
Buy the Jan-2009 $90 LEAP Call, currently $10.40

Earnings: Jan 22nd

Breakdown target: $80.00 Hit 11/12

Position: APR 2008 $90 Call JEC-DR @ $6.50, exit 1/20 @ $3.10


COP $72.89 -10.15 Conoco Phillips *** Stopped $81.00 ***

No news on Conoco other than we were stopped out early in the week when the drop first began and missed out on all the pain.

Breakdown target: $80 hit 11/12

2009 $90 LEAP Call OJP-AR @ $8.60, exit $6.80, -1.80 1/15


CNQ $63.77 -7.14 Canadian Natural Res. *** New Stop $61 ***

CNQ declined sharply after Credit Suisse warned that the new tax rates, sharp drop in drilling and strong Canadian currency would make it hard to raise profits. While CNQ is susceptible to those worries it is also expanding outside Canada. I started to close the position but Friday's close was right on long term support. I added a stop instead just in case the decline continues.

Entry 11/29: $66

Position 11/29: 2009 $90 LEAP Call OKR-AR @ $6.50


CLB $111.49 -7.31 Core Labs

No news, holding at support at the 200-day average.

Remediation plan: Buy shorter call to average down cost

Buy: June $130 Call CLB-FF currently $6.10

A return to anything over $125 will recover our lost premium while retaining the long term position.

Breakdown Trigger: $130 11/12

Position: 2009 $140 LEAP Call ZYM-AH @ $21.30


PBR $94.37 -16.84 Petrobras *** Stopped $97 ***

Petrobras fell on news that reserves outside Brazil fell -12% mainly as a result of Bolivia nationalizing its gas reserves. Reserves inside Brazil rose +1.2% but that did not include the 5-8 billion find in the Tupi field. PBR has not declared that as commercial reserves yet but is working quickly to prove those numbers. I believe this is more of a market drop than a PBR related event. The chart of PBR is exactly identical to all the other charts of its peers for the week.

We actually exited the play for a profit since we had a favorable entry and PBR had been much higher. The drop stopped us out before the premiums evaporated. I am adding PBR to the watch list for a reentry.

LEAPs Alert Entry 11/12 @ $95

Position: 2009 $90 LEAP Call VDW-AR @ $17.10

Position: 2009 $110 LEAP Call XVQ-AB @ $10.00, 16.80 1/16

Alert on 11/2 recommending an immediate entry into the $110 LEAP. The prior recommendation had been calling for an entry into the $90 LEAP on a dip to $80. The correct LEAP for the current position is the $110 LEAP.


FWLT $129.94 -11.64 - Foster Wheeler

The Foster CEO was on CNBC on Friday and had nothing but positive things to say about the company. He reiterated that although they do a lot of building for oil companies the price of oil has zero to do with FWLT stock. The decline knocked Foster back to our entry point and to strong support at $130. I believe FWLT will come screaming back once the market recovers. The challenge is waiting for the volatility to end. We are only down $4 on the LEAP and there is a 2:1 split on Tuesday. That should rekindle buyer support at the $65 level. Our $150 LEAP will split into (2) $75 LEAPS.

Shareholders approved 2:1 split for Jan-22nd.

Breakdown trigger: $135 hit 11/06

Position: 2009 $150 LEAP Call ZHF-AW @ $29.10


XOM - $85.08 -5.22 Exxon Mobil

Broke the support of the 200-day average but still holding near the highs. Earnings not until Feb-1st. No specific news of note.

Breakdown trigger: $88 Hit 11/01

Position: 2009 $100 LEAP Call ODU-AT @ $7.90


CAM - $45.58 -3.15 Cameron International *** Stopped $44 ***

That really ticked me off. CAM dipped intraday on Friday to tag our stop at $44 before recovering into the close. This was even more amazing since CAM was nominated to join the S&P-500 in place of HET on Thursday. The change will take place on Jan-28th. I will be adding CAM back to the watch list.

Earnings schedule: Jan-31st

Breakdown target: $95 Hit 10/30 (47.50 post split)

Post split (2) 2009 $50 LEAP Call OKA-AJ @ $9, exit $6.30, -2.70


SLB $79.52 -14.49 - Schlumberger *** Stopped $87 ***

Fortunately we were stopped out early Wednesday at $87 and did not have to suffer the drop to $72 on Friday. SLB missed earnings by a nickel ($1.13) but gave positive guidance for 2008.

Earnings: Jan-18th missed by a nickel

Breakdown target: $95.00 hit Oct-22nd

2009 $100 LEAP Call VWY-AT @ $15.60, exit 1/16 @ 9.00, -6.60


CVX $83.46 -7.21 - Chevron *** New Stop $78 ***

No news, ugly chart but still holding over support at $80.

Earning schedule: Feb-1st.

Breakdown trigger: $87 hit Oct-22nd

Position: 2009 $100 LEAP Call VCH-AT @ $6.40


NOV $59.55 -10.28 - National Oilwell Varco

No specific news but a casualty of the SLB earnings miss. NOV has declined to support at $60. I was going to add a stop but the option premium is only a buck today so we are better off holding the position.

Earnings schedule: Feb 6th

Breakout Trigger: $80, hit 10/11/07

Position: 2008 May $90 Call NON-ER @ $7.20


MDR - $45.05 -8.75 McDermott Intl *** Stopped $45 ***

Good timing. The stop was $45 and the low was $44. No specific news.

Earnings: Nov 8th, +37%

Breakout trigger: $53, hit 9/20

2009 $60 LEAP Call OYZ-AL @ $9.00, exit $6.10, -2.90, 1/17


CHK $37.23 -2.29 Chesapeake Energy *** Closed ***

I am afraid the price of gas will begin to decline soon. CHK gave up 10% last week but we are still positive in the position. I am going to close it rather than wait for gas to fall in February.

Earnings: Nov 7th -34%, beat by 3 cents.

Position: 2010 $35 LEAP Call WZY-AG @ $6.60
10/28 Price update:
Expired Oct Put +90 cents, $7.50, exit $8.00, +0.50

Insurance put:
Oct $30 Put CHK-VF @ 90 cents. Expired


HP $35.47 -2.48 Helmerich & Payne *** Stop Loss $29.50 ***

No complaints here. A minor loss despite the SLB beating. Still well above our entry and well above strong support at $32.

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

Insurance put:
Position: Nov $30 HP-WF. @ .50, Stop $28.50


BHP - $60.72 -6.97 BHP Billiton ** Stopped $65.00 **

BHP sprinted higher on Monday to $71 but collapsed on Tuesday to trigger our stop. We got out $5 above the low for the week.

Breakdown target: $55 hit 8/15/07

2010 $70 LEAP Call LPH-AN @ $9.00, exit 1/16 @ 13.30, +4.30

Non-Energy Positions

MOS $80.02 -19.19 - Mosaic Co

A $30 move from the Monday high at $110 to the Friday low at $80. The volatility is amazing. The CEO was on CNBC this week and there was ZERO cause for alarm. They are getting progressively higher prices and have more global demand than they can supply. This drop was painful but we are only $5 below our entry point.

The volatility is so high we can't afford to buy a straight insurance put or sell a covered call. Instead we will attempt to milk some extra money out of MOS if we get another breakdown in support to $60.

Bull put credit spread:

If MOS touches $70: Buy Mar $60 Put MOS-OL
If MOS touches $60: Sell 2009 $125 LEAP Put XXY-ME

We want to buy the long put first while it is still relatively cheap and then sell the short put at its maximum price. I chose the strike based on existing open interest to lessen the chance of a quick assignment.

Breakdown trigger: $85 Hit Jan-10th

Position: 2010 $100 LEAP Call LXW-AT @ $24.20


MTW $35.60 -4.41 Manitowoc *** Stopped $37 ***

No news, heavy selling and a drop back to support to stop us out.

Breakdown trigger: $45 Hit 01/04

2009 $50 LEAP Call VMT-AJ @ $7.45, exit 1/17, $4.00, -3.45

Covered LEAP Calls

AAPL $161.36 -11.33 Apple Inc *** Covered LEAP Call ***

Apple fell flat after Steve Jobs failed to generate excitement at MacWorld and the bear market did the rest. The stock gapped open on Monday and I had to adjust the prices up about $5 from the initial play description. Now a week later Apple has declined -$16 from that open. We could pickup another $10 bucks in premium by closing the $200 LEAP and selling the $180 instead but I would rather wait until after Apple's earnings on Tuesday befor emaking any changes.

Long: AAPL @ open of $177.52 (Jan-14th open)
Short: 2009 $200 LEAP Call OBR-AT @ $30.00
Breakeven: $147.52

The spread is $22.50 plus the call premium of $30.00 will produce a profit of $52.50 on a $150 investment or roughly 35% if Apple is over $200 by expiration.


RIMM $88.58 -5.12 Research in Motion - Covered Call Stop Loss $77

Minor decline in RIMM compared to the market drop and it appears to have found support at $88. Oppenheimer upgraded RIMM to an outperform on Friday with a $115 price target.

See the Jan-13th LEAPs newsletter for the description of the change in the options.

Alert entry 11/12 @ $102.60

Covered LEAP Call:

LONG RIMM @ $102.60
SHORT 2009 $150 LEAP Call XTB-AJ @ $18.50, close $9.40 1/14
SHORT 2009 $110 LEAP Call VHO-AB @ $18.30 on 1/14/08

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