16
Aug

Wrap – Week Ended 08/15/08

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Well that was less than fun and one of the worst months I've had since publicly disclosing my trades (see updated holdings on the ZEB Perf tab). 

Sentiment on the group, despite the occasional glimmer of hope, remains decidedly negative.

  • Blame the "dollar - oil" reversal trade,

 

  • Or blame fears of oil demand destruction (more properly termed demand growth erosion since no one sees global crude demand declining in 2008 or 2009 but only rising 1 mm bopd each year),

 

  • Or blame a perceived natural gas glut in the states.

 

  • Or blame job security at the hedge funds, as in "I know its cheap but I'll blow it out now and buy it back this Fall even cheaper ... if I still have job".

 

  • Or blame poorly guided Hurricanes which don't seem to understand the energy markets and their place in them,

 

  • Or blame a kinder, gentler Iran (right, right, I know, give me a break)

 

  • Or a vacationing Movement for the Emancipation of the Nigerian Delta,

 

  • Or blame the new OPEC motto: "oil prices are too high".  The unpublished second line to the motto reads "because we need the West to continue to buy oil and not develop alternatives that would cut the number of Palm Shaped Islands under construction" but that's too long and sounds a little greedy,



  • Or blame the Olympcis (well, in the last week anyway) for providing a bright and shiny and non-coal burning distraction and thereby reinforcing the Summer doldrums in the market,

 

  • Or blame Speculators who, when they are on the short side of a trade, unless its is a financial stock, are actually like by Congress, a body who I think should be blamed for many things and often.

The fact of the matter is that right now not war, not pipeline disruption, and not larger than expected or even unexpected product draw downs can stop the tumbling energy market at this time from er, well, tumbling. The true reason(s) for the fall don't matter as much as recognizing what will alter sentiment and get the group back on track. Until sentiment improves I plan on being more opportunistic with options trades while doing the legwork (listening, reading, and spreadsheeting) to lay the ground work for future equity and option entries.  



 

 

2 Responses to “Wrap – Week Ended 08/15/08”

  1. 1
    sane Says:

    Was in Mexico this week. Met an engineer for Pemex who works at the Cantarell complex at the resort I was at. He said that Pemex has the ability to stave off some of the decline of Cantarell and possibly maintain a steady production rate for a couple of more years, but lack of money has been one of the main drivers in the rapid decline of production. He was saying that a lot of peoples around Pemex are more and more supportive every day of jv’s with international oil COs, but that he doubts it will ever happen d/t the government. He even admitted that they know there is a bunch of oil around Mexico, but that they just don’t have the tech and know how to get it out of the ground efficiently and or quickly enough. He said Mexico is going to be hurting here soon when their cash cow becomes there debt wagon when they have to start importing oil.

  2. 2
    ddaley Says:

    http://seekingalpha.com/article/91289-five-options-ideas-chesapeake-energy-cit-group-commercial-metals-gld-campbell-soup?source=d_email
    Among some of the more bullish trades: call spreads on Chesapeake Energy (CHK), a substantial ratio spread on CIT Group (CIT), bullish spreads on Commercial Metals (CMC), butterflies on the SPDR Gold Trust (GLD), and call buying in Campbell Soup (CPB).

    Bullish Trading Hits Chesapeake Energy

    Chesapeake Energy saw bullish trading throughout the week. The stock finished Friday trading for $45.53 and up 5.2 percent from a week ago despite three-month lows in crude oil. In the options market, bullish spread trading was seen on more than one occasion. For example, at 15:00 Eastern time Wednesday, 4,300 of the CHK October 50 calls traded on the offer for $2.75 a contract. The same number of October 60s traded bidside for .75. Open interest in the 50s increased by 4,756 and the 60s saw open interest increase by 4,359 contracts.

    So, it appears that the volume represents opening of bullish spreads. If so, the strategist is looking for a big move in CHK. With the stock at $45.00, they are paying $2.00 for the spread, with the potential of making $8.00 if shares of Chesapeake move to $60 and or beyond by October options expiration.

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