Option Investor
New Plays

New Option Plays

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WLL None None

Play Editor's Note: Oil and energy stocks are on the move again and almost all the stocks I reviewed in this sector look poised to move higher. The threat of hurricane Gustav hitting the Gulf of Mexico could push crude oil higher. Plus, we have the ongoing conflict with Russia and Georgia and the rising tensions between the U.S./Nato and Russia over this conflict. Oil tends to move up into the middle of September and then reverses lower once the worst of hurricane season has passed and the summer driving season ends.

FYI: More oil stocks that look like bullish candidates are: OII, OXY, BHI, HP, OIS, SPN and the XLE.

New Calls

Whiting Petrol. - WLL - cls: 95.80 chg: +2.38 stop: 89.95

Company Description:
Whiting Petroleum Corporation, a Delaware corporation, is an independent oil and gas company that acquires, exploits, develops and explores for crude oil, natural gas and natural gas liquids primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast and Michigan regions of the United States. (source: company press release or website)

Why We Like It:
Please read tonight's Play Editor's Note. WLL is a bullish looking oil stock. Shares have broken out from its trendline of lower highs and technical resistance at several moving averages. Volume has been light but that is normal for late August. We are suggesting readers buy calls on WLL now. Or you can wait until after the oil inventory report Wednesday morning. Oil might dip on the report and WLL could dip with it. Odds are good that hurricane Gustav will hit the Gulf of Mexico and that should drive oil higher. We are setting two targets. Our first target is $103.50. Our second target is $107.00. FYI: More conservative traders may want to play with a stop loss at $91.45, under the recent low. Meanwhile the Point & Figure chart is bullish with a $132 target.

Suggested Options:
We expect this play to be over in three weeks so we're listing September options. October options should also work well.

BUY CALL SEP 95.00 WLL-IS open interest=1072 current ask $6.40
BUY CALL SEP 100.0 WLL-IT open interest= 821 current ask $4.20
BUY CALL SEP 105.0 WLL-IA open interest=1338 current ask $2.45

Picked on August 26 at $ 95.80
Change since picked: + 0.00
Earnings Date 10/30/08 (unconfirmed)
Average Daily Volume = 1.1 million


United States Oil - USO - cls: 93.90 chg: +0.80 stop: 89.79

Company Description:
The United States Oil fund is an exchange traded fund (ETF) that mimics the performance and price of West Texas Intermediate light, sweet crude oil.

Why We Like It:
I expect crude oil to rally by the end of the week and into next week thanks to the oncoming hurricane Gustav. Yet short-term the commodity could dip on Wednesday's oil inventory report. The report comes out tomorrow around 10:30 a.m. We are suggesting readers buy the dip following the report. I would look for a pull back near $92.00 or potentially $90.00. The newsletter's strategy will be to buy calls on the USO at 11:30 a.m., about 1 hour after the report. You may want to adjust your entry based on how the market and oil is acting tomorrow. Our short-term target is $99.50.

Suggested Options:
This play will be over in three weeks so we're suggesting the September calls. More conservative traders may want more time and buy Octobers. Strikes are available at $1.00 increments. Pick the strike you like the best.

BUY CALL SEP 92.00 IYS-IN open interest=2174 current ask $5.50
BUY CALL SEP 95.00 IYS-IQ open interest=9777 current ask $4.10
BUY CALL SEP 98.00 IYS-IT open interest=2314 current ask $2.90

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 13.9 million

New Puts

None today.

New Strangles

None today.

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