HOT TRADING STRATEGIES FOR A COLD MARKET
Daily Stock Market Equity and Options Trading Commentary

To get a better understanding of the option ideas expressed in this blog, buy my ebook today!

Wednesday, June 3, 2009

Fuel Your Portfolio with these Buy-Write Option Strategies

As posted in my blog, historically oil and gas both peak in the summer months. As we can see from last year's chart oil peaked in mid July.
I have put together a list of buy-write option strategies that are near the money (unless indicated in the money) on stocks in the oil and gas sector (with the exception of First Solar, it correlates well with the oil and gas sector) for the July expiration (July 18, 2009). The list below is in alphabetic order, but if you'd like to see or print a spreadsheet of them ranked in order by % return and probability click here or visit my blog.

Below is a list of 50 securities. (All data priced as of pre-market Wednesday June 3, 2009).

Stock Ticker Strike % Probability % Return
Anadarko Petroleum Corp (APC) 50 51.9 6.6
Apache Corp (APA) 85 54.7 5.4
Average

53.3 6.0
BP ADR Each Representing Six Ord Shs (BP) 50 63.7 2.5 In $
Canadian Natural Resources Ltd (CNQ) 60 59.2 6.4 In $
Chesapeake Energy Corp (CHK) 25 47.1 10.4
Chevron Corp (CVX) 70 46.4 4.5
CNOOC ADR representing 100 Class H Shares (CEO) 140 55.7 5.8 In $
ConocoPhillips (COP) 48 50.3 4.9
Devon Energy Corp (DVN) 65 57.4 5.7 In $
Diamond Offshore Drilling Inc (DO) 85 63.5 4.5 In $
Direxion Energy Bull 3X (ERX) 40 54.8 16.0
EnCana Corp (ECA) 60 43.3 7.6
EOG Resources Inc (EOG) 75 57.3 5.9 In $
Exxon Mobil Corp (XOM) 70 67 2.1 In $
First Solar (FSLR) 190 49.6 10.8
Frontline (FRO) 22.5 55.9 5.0 In $
Halliburton Co (HAL) 24 49.7 7.5
Hess Corp (HES) 60 55.7 8.5 In $
Linn Energy (LINE) 20 52.4 3.2 In $
Marathon (MRO) 35 40.1 8.8
National Oilwell Varco Inc (NOV) 40 54.7 7.5 In $
Nexen Inc (NXY) 25 61 6.0 In $
Noble (NE) 37 53.7 7.2
Noble Energy Inc (NBL) 65 47.3 7.6
Nordic American Tanker (NAT) 30 72.7 1.6 In $
Occidental Petroleum Corp (OXY) 70 49.5 6.0
Petro-Canada (PCZ) 45 48.8 9.2
Petrochina Depository Receipt (PTR) 120 49 7.2
Petrohawk Energy Corp (HK) 26 51.6 8.5
Petroleo Brasileiro ADR Reptg 2 Ord Shs (PBR) 45 52.7 7.0
Proshares Ultra Crude Oil (UCO) 14 43.3 14.0
Proshares Ultra Oil & Gas (DIG) 34 43.5 11.5
Repsol YPF Depository Receipt (REP) 22.5 70.9 2.1 In $
Sasol Level II ADR (SSL) 40 41.3 9.9
Schlumberger NV (SLB) 60 49.4 7.2
Southwestern Energy Co (SWN) 45 51.6 7.1
SPDR Energy (XLE) 54 48.6 5.4
SPDR S&P Oil & Gas (XES) 23 76.5 2.2 In $
StatoilHydro ADR Rep 1 Ord Shs (STO) 22.5 45.9 7.5
Suncor Energy Inc (SU) 35 54.5 7.3
Talisman Energy Inc (TLM) 15 69.7 3.8 In $
Total Conv Into 1/2 Shs ADR (TOT) 60 49.8 4.9
TransCanada Corp (TRP) 30 61.8 2.3 In $
Transocean Inc (RIG) 85 49.4 7.0
Ultra Petroleum Corp (UPL) 48 49.4 7.5
United States Natural Gas Fund LP (UNG) 16 51.3 4.6
United States Oil Fund LP (USO) 39 42.8 7.7
Valero Energy Corp (VLO) 23 46.4 8.3
Weatherford International Ltd (WFT) 22 52.9 9.0
XTO Energy Inc (XTO) 44 48 7.3

The July options expiration has 45 days left. If oil and gas peak in mid July again, chances are most of these securities will expire above the indicated strike price, allowing the gain to be locked in. Depending on brokerage commissions and how bullish/bearish you are you'll want to adjust the strike price and expiration dates.

Of these strategies I am most interested in: Hess, National Oilwell, Noble Corp, Suncor, and the Direxion Energy Leveraged ETF. This is because their return % and probabilities of expiring above the indicated strike are both above the average for my analysis of these 50 stocks. For more information on how to trade and price options click here.

There are many more covered call option strategies to profit from as oil heats up this summer. If you're more aggressive and want to take on more risk check out the lower probability and higher return option strategies. If oil really heats up any of these names could get 10%-20% higher which could be written out for a higher strike price. In a case when I am extremely bullish, I usually buy the stock, wait for a 7%-10% gain and then write out a covered call for a strike above the current price.

For spreadsheets of these stocks listed in order from least to greatest % returns, least to greatest % probability of expiring above indicated strike, and the average for both see my blog post titled "50 Oil and Gas Options Spreadsheet"

Bookmark and Share
Sphere: Related Content

0 comments:

Hottest Blog Posts of All Time