Option Investor
Play Updates

In Play Updates and Reviews

Printer friendly version

USO $80.42 +1.82 - Oil Fund - Short *** Stopped $80.50 ***

Irrational exuberance continues to push oil prices higher and our stop was hit on Thursday. I had several readers email and ask if I would reenter. Personally I did not take the stop. I am still long the puts. After seeing crude hit $103 I was questioning that decision. I think Wednesday is going to be the key. If OPEC does nothing maybe the air will go out of this rally. Other than that I have no clue why fundamentals don't matter.

Entered before the close on 2/19 with USO @ $78.66

Position: April $77 PUT UNA-PY @ $3.50, exit $2.50 2/28, -1.00

Target $70.00 for an exit.


OII $60.00 -2.24 - Oceaneering Intl *** Stop Loss $58 ***

I was feeling pretty good about OII and its return to grace after that -6 point earnings drop. Then Friday happened and OII lost 4.40 for the day to take it right back to support at $60. No news, add stop at $58.

Breakout trigger: $65.50 (2/19)

Position: Short July $75 PUT OII-SO @ $12.80


UNT $55.15 +.94 - Unit Corp *** Stop Loss $53 ***

Earnings were not exciting. Revenue was flat. Earnings beat the street by 2 cents but were down from the comparison quarter. Reduced gas drilling activity was the primary cause. I am going to place a stop on UNT just below last week's lows and we will exit on any weakness.

Breakout trigger: $52.00 hit 02/04

Position: Sept $55 Call UNT-IK @ $3.80


PBR $117.34 -1.21 Petrobras *** Stop Loss $104 ***

Petrobras lost $8 on Friday on no news. The Brazil Bovespa fell -4% and Petrobras is one of the largest components. It appears to be simply a market event and not stock specific. Fortunately PBR was up +8 for the week before Friday's decline. Ken Heebner said on Friday Petrobras could grow 10 times its current size over the next few years.

Breakout trigger: $101.50, hit 1/24

Position: 2009 $110 LEAP Call XVQ-AB @ $12.70


VLO $57.77 -2.16 Valero *** Stop Loss $54 ***

Valero was knocked back to support at $58 on $103 oil and a 14-year supply high of gasoline. No expanding margins in refining this week. Valero also said it was going to add $3 billion to its current $5 billion stock buyback program and spend $2.4 billion to upgrade its Port Arthur refinery to 415,000 bpd and move more into the low sulfur diesel fuel, which is expected to grow faster and have better margins than gasoline.

Breakdown trigger: $50.00, hit 1/23

Position: 2009 $60 LEAP Call VHB-AL @ $5.00


FLS $108.90 +5.93 Flowserv *** Stop loss $90 ***

FLS rocketed higher on earnings that beat the street, a $300 million buyback announcement, reaffirmed guidance and a 67% dividend hike. Did they leave anything out? Earnings rose +121% for the year and +188% for Q4. A new high on Thursday met some light selling on Friday but definitely no weakness.

Breakdown trigger: $77.50, hit 1/22

Position: July $90 Call FLS-GR @ $6.00


FLR $139.25 +7.41 - Fluor Corp *** Stop $105 ***

FLR reported earnings that more than tripled in Q4 and raised their full year guidance. Definitely no compolaints.

Earnings: Feb 28th +$2.82 with items vs street $1.18

Breakdown trigger: $145 Hit 12/13

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

Remediation plan: 1/20
LONG: April $110 Put FLR-PB @ $9.20
SHORT: Jan $170 LEAP Put XOB-MN @ $58.40


RIG $140.51 +2.55 - Transocean Inc

RIG was up strongly for the week until it hit a -3.37 bout of market induced profit taking on Friday. The WSJ reported that RIG was the money flow leader for buying on weakness on Friday. Must have been a lot of traders waiting for that dip they never thought would come.

Earnings: Feb 20th, +70%

Breakdown trigger: Hit 12/4 @ $130

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


CLB $121.60 -4.10 Core Labs

Core Labs declined all week after reporting stellar earnings the prior week. There was no news and I am chalking it up to post earnings depression where earnings traders exit to find another play. $130 is resistance and that was almost the high on Tuesday.

Earnings: $1.36, +39%.

Breakdown Trigger: $130 hit 11/12

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

Remediation addition:
Position: June $130 Call CLB-FF @ $6.10


FWLT $65.45 -10.79 - Foster Wheeler ** New Stop $62 **

That was an ugly week. FWLT missed estimates by 20 cents by posting 56-cents compared to street estimates of 76-cents. FWLT was knocked for a $15 loss from Monday's close. The reason for the loss was a $5 million reserve for a contract dispute and the removal of a favorable tariff for power generation in Italy. These are not repeatable items. I believe the selling was overdone simply because the expectations were too high. In the E&C business things happen in spikes. Major contracts, payments and problems come in the millions of dollars and for a company the size of FWLT these cause bumps in the reporting process.

I read several commentaries and listened to the call with the CEO. I think FWLT will rebound from this drop. Their bookings backlog for Q4 was almost equal to all of their business for 2006. This company is growing rapidly and had captured the attention of the momentum players. When something derails a momentum stock it is not a pretty picture. I am going to add a stop and should the unthinkable occur we will exit and lick our wounds.

Earnings: Feb-26th Missed 56 vs 76 cents due to items.

2:1 split on Jan-22nd.

Breakdown trigger: $67.50 hit 11/06 (post split)

Position: (2) 2009 $75 LEAP Call ZHF-AO @ $14.55


NOV $62.30 -2.55 - National Oilwell Varco *** Stop $59 ***

Dead stop at resistance at $66. The uptrend has failed and I am raising the stop to take us out on any further weakness.

Earnings: Feb 6th +57%

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

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


HP $44.83 +1.10 Helmerich & Payne *** Stop Loss $41 ***

Another new high on no news. Friday's dip was market related. I raised the stop just in case.

Earnings: Jan-31st $1.02

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

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

Non-Energy Positions

ATI $77.35 -6.29 - Allegheny Technology

After two weeks stuck at resistance of $85 ATI imploded on Friday with a -7.24 loss. There was absolutely no news and no reason for the dip other than somebody got tired of waiting for a continued breakout and dumped some stock.

Entry: ATI 76.60 02/10

Position: 2009 $90 LEAP Call OYG-AR @ $8.90


TEX $67.45 -.19 Terex Corp

Friday's -2.50 dip only offset 2.50 in gains from earlier in the week. No complaints here. TEX announced it had completed acquisition of ASVI on Monday for $488 million.

Earnings: Feb 21st, +72%, +27% in revenue

Position: Jan 2009 $70 LEAP Call VXQ-AN @ $8.60


SGR $64.38 -.15 Shaw Group

+$4 gains early in the week were erased by Friday's -$4 drop. Completely market related and no specific news. No complaints whatsoever.

Breakdown trigger: $55 Hit Jan-16th

Position: 2009 $60 LEAP Call OWA-AL @ 11.50


MOS $111.30 +2.34 - Mosaic Co

MOS gave back $10 from the early week highs but still posted a gain for the week. No specific news but the number of analysts singing its praises continues to grow.

Breakdown trigger: $85 Hit Jan-10th

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

Covered LEAP Calls

AAPL $125.02 +5.56 Apple Inc *** Covered LEAP Call ***

Finally a gain. About dang time! Next week should also be positive for Apple with the shareholder meeting on Tuesday and Apple software day on Thursday. Apple is expected to announce some competitive attacks on RIMM with new iPhone features. Four days don't make a new trend but a move over $135 would.

When Apple starts to post a new positive trend we will do a put spread to recover some more money. First we wait for the trend.

Long: AAPL @ open of $177.52 (Jan-14th open)
Short: 2009 $150 LEAP Call VAA-AW @ $20.80
Breakeven: AAPL @ $136.12

Position changes:
Closed $200 LEAP Short @ $9.40 ($30.00 - 9.40 = gain +20.60)
Replaced with $150 LEAP short @ $20.80
AAPL cost basis $177.52 - $41.40 (20.60 + 20.80) = 136.12
Breakeven: AAPL @ $136.12


RIMM $103.80 -4.15 Research in Motion - Stop Loss $80

+12 the prior week, -4 this week? I would take a repeat of that all year long. We could see some additional weakness on Thursday when Apple talks about new changes to their iPhone that could impact the Blackberry.

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 (cost $102.60 -9.10 $150 LEAP = 93.50)
SHORT 2009 $110 LEAP Call VHO-AB @ $18.30 on 1/14/08

Closed: 1/14
SHORT 2009 $150 LEAP Call XTB-AJ @ $18.50, close $9.40 +9.10

Leaps Trader Update Archives