Option Investor

Option Writer Portfolio - July

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Sasol Limited ADR (Symbol: SSL) operates as an integrated oil and gas company. The company operates coal mines; produces synthesis gas through coal gasification and natural gas reforming, using its proprietary technology to convert synthesis gas into synthetic fuel components, chemical feedstock, and pipeline gas; markets refined liquid fuel products, including gasoline, fuel alcohol, diesel, jet fuel, illuminating paraffin, LPG, fuel oils, motor and industrial lubricants, and bitumen; and distributes and markets natural gas.

Sector: Basic Materials

Industry: Oil & Gas Refining & Marketing

EPS Date: September 8th

Yet another Basic Materials trade. SSL is about $2.75 or 5% from the short strike. The initial return is 17% and well above our goal of 10%. We are selling the July 55 Strike in hopes that the recent consolidation and test of support at the 89 day SMA will provide a nice bounce. At $59.04, the 50 day exponential moving average provides some upside resistance. Then we have support on the downside at $56.17 from the 89 day SMA followed by $53.96 from the gap up. I like gap trading because it forces me to be patient. Sometimes it is important to wait for better opportunities. For instance, the initial trades placed are now at risk of being stopped out because we are supposed to provide the complete list a week prior to the front month expiration. I am glad we held tight this long and now have "powder dry" (a.k.a. cash) to trade at these lower levels. If SSL bounces up to resistance and has some trouble breaking out we will look at selling the calls on this as well.

Risk Management for SSL
Strike Stop = $ 55.00
Cost Basis Stop = $ 53.45
Technical Stop = $ 53.96

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