Option Investor
Play Updates

In Play Updates and Reviews

Printer friendly version

Energy Play Updates

USO $95.66 +1.87 - United States Oil Fund *** Short ***

Everything was going so well up until 4:AM Friday morning. Crude was $114.51 and falling. The Iran news broke and we saw a $5 spike over the next several hours. I think the Iran news will have faded by Monday but the U.K. Forties pipeline shutdown may continue to support prices.

I considered closing the play or putting a stop on it but our remaining premium is only 75 cents. For that price I will play the correction lottery and see if we get lucky. Use your own judgment on an exit.

Remember, gasoline, heating oil and natural gas futures expired on Friday and that could have a negative impact to crude futures next week.

Upside trigger: $90.00 Hit 4/15

Position: May $87 PUT UNA-QI @ $2.70


FLS $111.51 -2.21 - Flowserve

There was no news on Flowserve this week but be aware that earnings are on the 29th.

Breakout trigger: $110 Hit 4/16

Position: OCT $120 Call FLS-JD @ $10.40


UPL $86.35 +1.34 - Ultra Petroleum

Traders bought the dip in UPL on Thursday bringing it back into positive territory for the week. There was no specific UPL news.

The reason UPL has been rising is the new cross country pipeline to their property in Utah. Once completed they will be able to sell their gas for more money with access to the eastern markets. Ultra is on a capex program to spend $755 million in 2008 to boost production by 18-22%. They pln to boost production another 25-30% in 2009 over 2008 levels. 2008 estimates are for 135-140 BCF. They produced 117 BCF in 2007. 2009 estimates are for 170-175 BCF. 2010 estimates are for 200-205 BCF. That would be nearly double their 2007 production.

Breakout trigger: $83 Hit 4/14

Position: 2009 $90 LEAP Call OZH-AR @ $9.40


SPWR $86.29 -3.04 - SunPower *** Stop Loss $80 ***

SPWR is holding on support at $85 on no news. SPWR is the technology leader of the group with a 22% efficiency rating in the lab and 19.3% in commercial sales. Sunlight conversion efficiency is the holy grail of solar.

Cypress, which owns 56% of SPWR common stock and 90% of the voting stock, received a ruling from the IRS that would allow CY to spin off SPWR before Nov-09.

Breakout trigger: $66 (hit 3/24)

LEAP Call Spread
Long 2010 $80 LEAP Call LMO-AP @ $20.00
Shrt 2010 $130 LEAP Call LMO-AW @ $8.70


CY 28.34 +0.26 - Cypress Semi *** Stop Loss $21.50 ***

No news and no decline. Still holding near its 3-month highs.

Cypress, which owns 56% of SPWR common stock and 90% of the voting stock, received a ruling from the IRS that would allow CY to spin off SPWR before Nov-09.

Breakout trigger: $21.50 (hit 3/24)

Position 2010 $25 LEAP Call WSY-AE @ $4.90


MDR - $59.90 -.45 McDermott Intl ** Stop Loss $55 **

Thursday's opening drop was erased and MDR moved back to near its recent highs. No news and no change.

Breakout trigger: $51.00 (hit 3/24)

LEAP Call Spread
Long 2009 $55 LEAP Call OYZ-AK @ $8.28
Shrt 2009 $75 LEAP Call OYZ-AO @ $3.10


TS $52.08 -2.22 - Tenaris *** Stop Loss $49 ***

A reader emailed me on Monday asking if we should take profits on the gap open to just over $56. I replied that I expected TS to continue higher over the coming months and that was why we had no exit target in the portfolio. Then the Argentinean Economic Minister resigned and the Argentinean MERVAL index imploded. It would be the equivalent of Bernanke or Paulson resigning. Can I have that email back please? Hindsight is always 20:20 and while it would have been nice to exit knowing what we know now I still believe the demand for pipe in the energy sector is only going to get stronger.

Breakdown trigger: $46.00 hit 3/19

Position: SEP $50 Call TSW-IJ @ $3.40


HP $55.84 -.69 Helmerich & Payne *** Stop Loss $51 ***

Even bulletproof stocks can still trip. HP finally showed some weakness with a sharp drop on Wednesday. That drop was almost completely erased by Friday's close. Rig rates are still rising and the supply remains tight despite new rigs coming to market. HP's rigs are bought well in advance of their completion.

*** Earnings are Thursday May 1st ***

Earnings: Jan-31st $1.02

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

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

Non-Energy Positions

EBAY $31.30 -0.41 - Ebay Inc *** Earnings Short ***

EBAY has not declined materially but it had help from the GOOG/AMZN earnings. Google is looking like it might roll over from its post earnings spike. If the rest of the net stocks start to follow Google down we might get our wish. EBAY is only $1.28 above our strike price and a $2 move would make us profitable. Keep the faith!

Entry 4/14 @ 30.87

Position: May $30 PUT XBA-QF @ $1.10

Covered LEAP Calls

AAPL $169.73 +8.69 Apple Inc *** Covered LEAP Call ***

Strong earnings and new 3-month high at $170. No change.

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 $120.04 -3.18 Research in Motion

Despite a nearly $10 drop from Monday's highs RIMM is holding its longer-term gains rather well. There was news on Friday that the new 3G BlackBerry Meteor availability was pushed back from June to August. No change, orders are expected to be huge.

If we continue holding the position until January and let it get called away your profit will be $34.80 when the stock is called away for $110.

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