TGIF And OPEC Sends Oil Lower

Sentiment Watch: The Energy groupis  just reacting to day to day swings in oil now. Yesterday's move lower did not fall back through recent lows for the group and came on low volume so the panic feeling seen several times in the last two weeks was replaced with more of a sense of "oh great, another boring red day...what's NBC showing in Beijing now?" Looking for more of the same today and an inauspicious end to the August expiration.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch - natural gas storage thoughts
  3. Stuff We Care About Today
  4. Odds & Ends

Holdings Watch: Wiki Tab updated

  • HK August $30 calls added for $0.25.  Brings average cost down to $0.50.

Commodity Watch:

Crude oil retreated on another gain in the dollar yesterday, falling $0.99 to $15.01 after failing to punch a new three month low. This morning crude is trading off nearly $2 as the dollar continues to rally and OPEC trims its global demand for crude forecast.


  • OPEC Watch: Oil demand will rise by 1 million barrels per day this year, 30,000 bpd less than the previous forecast, Opec said in the report. That was the fifth reduction this year, after cuts in July, June, May and February. The group left its forecast for world consumption growth in 2009 unchanged, predicting a rise of 900,000 bpd. Opec said that demand for its crude is expected to average 32.05 million bpd in 2008, lower than the group's production in July of 32.64 million bpd. "With current Opec production well above the expected demand for Opec crude, there is potential for a sharp build in crude oil inventories," it said. ~ from Reuters. These estimates are in line with the EIA and IEA estimates from earlier this week and make you wonder when OPEC will cut production back. They meet in September


  • PEMEX Guides For Flattish to Slightly Down 2009. Mexico's state run oil company said it expects 2009 production of 2.7 to 2.8 mm bopd, with 2008 to average 2.8 mm bopd. I really doubt their ability to suddenly curb the off the cliff declines they have seen at their biggest field, Cantarell


  • Tropics Watch: A tropical wave in the central Atlantic is expected to develop this weekend into a tropical depression or storm, may head towards Gulf.

Natural gas fell another $0.32 to $8.14- after the EIA storage report showed an injection of 50 Bcf which was in line to slightly low to the Street's expectation of 52 Bcf. On an intra day basis, gas fell to $8.00, a new 6 month low. Yes, I still think we are closer to the bottom but gas may take a tumble into the $7s before news from the sector provides fundamental seeming support for a recovery (see next paragraph). This morning gas is trading off slightly with oil but is still above $8

Natural Gas Storage Review: Traders were looking for a smaller injection to keep prices up although given the cool weather, I'm surprised the injection was as low as it was.  This number does little to move the needle on end of season storage which I see as 3.3 to 3.4 Tcfe. The importance of end of season storage in fact is probably less than ever this season with sentiment and therefore pricing responding to a perceived gas glut. I think the arguments for a glut are a bit overstated but I am beginning to think only capital budget reduction announcements by the major E&P growth names will help buoy the commodity.

Stuff We Care About Today:


Key Takeaways

1) Growth rates and forward P/CF metrics are high and low respectively relative to their historic norms.

2) There are some odd things about the table (see red circles). Specifically:

  • (PXD) is absurdly (poorly) valued to it in the ground reserve let alone its expected growth
  • NFX's "can't get no respect" forward P/CF ratio now under $3. Since I comment on their 2009 numbers rising from around $11 back after the 1Q08 call we have seen Street estimates for NFX creep all the way up to the current $15 ---per share. During this same period, NFX has continued to report strong well results leading the way to lower F&D costs and has raised its production guidance, only to see the stock fall ---% from its peak. Now I know the group is beat up but the bigger beating these shares have taken is in my mind unwarranted and I will make a point of pick entries for opportunistic call trades here while writing covered calls each near month.
  • GMXR's buy the company for the current price and get their Haynesville/Bossier fairway of the play acreage for free. Just think it goes away. Here too I plan to buy the common and start writing calls. Leaps may also be in order but the option metrics are not pretty here.

Odds & Ends

Analyst Watch: (NOV) upped to buy at Calyon.

139 Responses to “TGIF And OPEC Sends Oil Lower”

  1. 1
    Sambone Says:

    By Nick Heath

    LONDON (Dow Jones)–Crude futures oil fell more than $2 in London trade
    Friday, as fresh strengthening in the U.S. dollar prompted another bout of
    The greenback’s resurgence – it hit multi-month highs against the euro and the
    Japanese yen amongst other major currencies Friday – accompanied escalating
    concerns that economic slowdown will crimp global crude consumption, combining
    to keep downwards pressure on oil prices Friday.
    “There has been a great deal of long liquidation in the oil complex as
    investors have kicked out long oil holdings,” said Peter Beutel at trading
    advisory Cameron Hanover. “These were established on the belief that the dollar
    would keep on declining, so the dollar’s recent strength has forced them out.”
    At 1047 GMT, the front-month October Brent contract on London’s ICE futures
    exchange was down $1.48 at $112.20 a barrel, having slipped to $111.40 a barrel
    The front-month September light, sweet, crude contract on the New York
    Mercantile Exchange was trading $1.58 lower at $113.43 a barrel, a slight
    recovery from earlier intraday lows of $112.75 a barrel.
    The ICE’s gasoil contract for September delivery was down $10.50 at $1,005.75
    a metric ton, while Nymex gasoline for September delivery was down 405 points
    at 287.15 cents a gallon.
    The same factors driving the dollar’s advance Friday also helped consolidate
    increasingly negative sentiment over oil’s demand prospects. The greenback’s
    performance is seen more as a function of other currencies’ weakness, with
    expectations gathering that other developed economies are entering the same
    economic doldrums as the U.S.
    “Investors are rebalancing their portfolios in favor of the dollar amid
    prospects that interest rates in eurozone have peaked, and that the ECB will
    have to start its monetary easing cycle to tackle a rapid slowdown in European
    economies,” said Andrey Kryuchenkov, analyst at Sucden Research in London.
    “Overall, oil has joined a broad commodity sell off…on fears of a global
    economic slowdown.”
    Oil prices were helped to their record highs by a steady decline in the U.S.
    dollar, with some investors using oil as a hedge against the weakening
    currency, while its demise also helped cushion the impact on demand for
    non-dollar denominated consumers.
    While oil prices have shown little overt reaction to the conflict between
    Georgia and Russia – although some analysts have suggested prices would have
    fallen further were it not for the violence – a de-escalation of military
    activity added to pressure on crude prices Friday, crimping the risk of further
    disruption to Georgian pipelines channeling Caspian crude to world markets.
    U.S. Secretary of State Condoleezza Rice arrived in the Georgian capital
    Tbilisi Friday, hoping to consolidate the fragile truce between the two sides.
    “While still a dangerous transitional period, the fact that diplomacy will now
    replace military action bodes well,” said MF Global analyst Edward Meir.
    As the height of the Atlantic hurricane season nears, oil market participants
    monitored the progress of a low pressure system located at the edge of the
    Caribbean Friday.
    According to the U.S. National Hurricane Center, “a tropical depression could
    form at any time during the next day or so as the system continues westward or
    west-northwestward near Puerto Rico and Hispaniola.” While the weather could
    prompt some short-position holders to close out ahead of the weekend, the
    system was unlikely to make it’s way into the key oil-producing Gulf of Mexico.
    “The Tropical Low in the Atlantic Basin is still under watch but all computer
    models are showing it deviating towards the U.S. East Coast rather than the
    U.S. (Gulf),” said Olivier Jakob of Swiss consultancy Petromatrix.
    Meanwhile, expiry of Nymex September light, sweet crude options Friday could
    inject volatility into crude futures trade Friday.
    Large amounts of open interest on put-options – which grant holders the option
    to sell crude at a predetermined price – between $100 and $120 a barrel could
    result in associated hedging activity from the writers, Friday. As crude prices
    fall below the option’s strike level, the option writers seek to hedge their
    exposure by selling futures.
    “Option expiration over the course of the day today could lead to some sizable
    swings in energy on Friday,” said MF Global’s Meir.

    -By Nick Heath, Dow Jones Newswires
    Dow Jones Newswires
    08-15-08 0715ET

  2. 2
    zman Says:

    Well oil is heading lower and I’m down to one PC as I walked into a blue cmos screen on the desktop this am. Goes well with a crushing in August expiration and tumbling oil before the first cup of coffee. Took the battery off the mother board and am waiting the internet suggested 30 minutes. Fun as my trading software is on that box, not this one. Tempted short HP or MSFT, not sure which.

  3. 3
    zman Says:

    Table at the end of the post shows production growth and current valuation to expected cash flow and a look at reserve valuations for the E&P dance list. Plan to add a few more metrics next week to the list including cash margins and hedging /commodity price sensitivity next week. Always good after a group washout to have tables to get your bearing. For instance, I knew NFX was beaten down but on the numbers, since they have been rising and not falling, it is even more so.

  4. 4
    1520sbroad Says:

    Like your thought on gmxr and covered calls. i don’t know NFX as well but their option premiums are pretty compelling too. Do you have a set of metrics you use when writing calls? hurdle rates of return from the premiums or just looking to rake off some cash and wait for the stock to recover somewhat?

  5. 5
    zman Says:

    1520 – the later. It may take awhile for this group to really recover so I’m thinking pretty high premiums for not too far out of the money options on NFX and if they do take the stock, fine, that’s ok too. On GMXR, I’m thinking more of a take out play and higher strikes.

  6. 6
    Bleemus Says:

    CHK Chesapeake Energy profiled in Barron’s Online (46.40 )

    Barron’s Online reports if you think that CHK’s stock followed the short-term swings in the price of its main product, natural gas, you’d be right. But you’d be mistaken if you thought Chesapeake’s earnings and growth prospects depend solely on the current price of the commodity. That’s nevertheless how the market has treated the stock of what’s become one of the nation’s largest and most diversified natural-gas producers… Chesapeake is not captive to the short-term swings in spot gas prices as it has locked in prices for much of its output this year and next. About 77% of its production in the second half of 2008 is hedged at $9.16 per million cubic feet and 54% in 2009 is hedged at $9.79, respectively. So, its earnings should be largely shielded from the plunge that’s taken nearby natural-gas futures down to $8.136 Thursday from their peak over $13 in early July. “We think of our business as a manufacturing business; it runs 24/7,” Aubrey McClendon, Chesapeake’s chairman and chief executive officer, told Barron’s Online. As a result, the company has no qualms about hedging its entire production. “We are not trying to be market timers, I don’t think anybody can call tops and call bottoms. We know that the company generates really attractive returns at the $10 market,” referring to the price he expects gas to average at over the next few years.

  7. 7
    Sambone Says:


    Soros Fund Management LLC, led by billionaire investor George Soros, bought an
    $811 million stake in Petroleo Brasileiro SA (PETR4.BR) recently, Bloomberg
    News reported Friday.
    The purchase made the Brazilian state-controlled oil company, better known as
    Petrobras, its largest holding, Bloomberg said.
    The stake made up 22% percent of the $3.68 billion worth of stocks and
    American depository receipts held by the fund, Bloomberg said, citing a filing
    with the U.S. Securities and Exchange Commission.

    Dow Jones Newswires
    08-14-08 2034ET

  8. 8
    1520sbroad Says:

    agreed – may take a while to recover for the group but option premiums group wide are still very rich for covered call writing.

    i just wish i had more cash on hand to buy up and cover some more while wiating for greener days.

  9. 9
    Fred Says:

    Pickens says oil won’t go below $100
    Thu Aug 14, 2008 2:45pm EDT
    NEW YORK (Reuters) – Texas oil billionaire T. Boone Pickens said on Thursday crude prices may soon fall as low as $110 a barrel amid falling gasoline demand, but should not sink below $100 because the United States depends heavily on oil imports.

    “I don’t think it’ll drop below $100,” Pickens told Reuters in a telephone interview. “I would say $110 is where it might go, something like that.”

    U.S. drivers have turned to public transportation and shortened trips in response to high gasoline prices, a major factor in oil’s drop of more than $31 a barrel since hitting a record over $147 per barrel last month.

    Pickens’ hedge fund BP Capital, which manages about $7 billion in assets, sank about 35 percent in July, according to a report this week in the New York Post.

    Pickens declined to comment in the interview about the performance of his fund.

  10. 10
    zman Says:

    Analysts continue to hide in this environment.

  11. 11
    ram Says:

    ZMAN – The analysts and fresh money is hiding. Difficult July and August (unless there is a miracle in the next few hours).

  12. 12
    zman Says:

    Ram – no miracle I see today, just more of the same.

  13. 13
    ram Says:

    I was looking for a little more spunk, but I understand. The solar herd has been basing for some time and they seem to have shifted to a positive bias in the last week or so.

  14. 14
    Bleemus Says:

    Capital One initiated MMR with an Add and $32 tgt. Firm believes that MMR provides an attractive risk/reward balance for investors interested in high-impact GOM/Gulf Coast exploration prospects. Firm estimates MMR will generate $450 mln in free cash flow this year and $400 mln in 2009, at the top of our small-cap E&P coverage list. The excess cash could be used to increase drilling, continue to pay down debt, make acquisitions, or pay special dividends.

  15. 15
    kyleandy Says:

    why would i want to buy an e&p stock that is making record money, has great prospects, increasing their reserves when i can buy a home building stock that is still losing major money, is hoping for a bottom in the housing mkt (not happening in fla), is shaky on their loans, laying off employees??? or the financials, where everthing is terrible, but bound to get better???

  16. 16
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude futures slid Friday as a report indicated world
    stockpiles will grow and a stronger dollar chased investment funds out of
    Light, sweet crude for September delivery was recently $1.93, or 0.8%, lower
    at $113.08 a barrel on the New York Mercantile Exchange. October Brent crude on
    the ICE Futures exchange fell $1.85 to $111.83 a barrel.
    Through Thursday, crude has dropped in seven of the last 9 sessions and is
    down more than 21% from its record $145.29 close July 3. Traders believe a
    combination of high prices and a slowing world economy will crimp demand
    The Organization of Petroleum Exporting Countries lent credence to this view
    Friday with a report pointing to increases in world oil stockpiles.
    “With current OPEC production well above the expected demand for OPEC crude,
    there is potential for a sharp build in crude oil inventories,” OPEC said in
    its monthly report.
    The dollar crept to a new six-month high against the euro, which was recently
    $1.4727 from $1.4809 late Thursday. The greenback’s weakness earlier this year
    drew investors seeking a hedge into dollar-denominated commodities, and traders
    said some are getting out on its rebound.
    “There’s fund liquidation going on,” said Tony Rosado, a broker with GA Global
    Markets in New York. “Basically, a lot of funds are bailing out of commodities
    with the dollar continuing to get stronger.”
    Russia’s offensive with Georgia this week largely failed to spark oil markets,
    and some observers speculate prices would have fallen further without the
    conflict. Georgia hosts major pipelines ferrying crude west from the Caspian
    Sea, including the million barrel-a-day Baku-Tbilisi-Ceyhan oil line that was
    closed last week due an an unrelated explosion in Turkey.
    “The markets appear to be becoming more selective in their response to the
    various military and political headlines, even when important pipeline flows
    are disrupted,” said Jim Ritterbusch, president of oil trading advisory firm
    Ritterbusch and Associates, in a note.
    Adding uncertainty to U.S. Gulf Coast crude production, the National Hurricane
    Center pointed to “high potential” for a tropical cyclone formation in an area
    of low pressure storm near Puerto Rico.
    “A tropical depression could form at any time within the next day or so,” the
    hurricane center said on its Web site.
    Front-month September reformulated gasoline blendstock, or RBOB, dropped 4.65
    cents, or 1.6% to $2.8655 a gallon. September heating oil fell 2.50 cents, or
    0.8%, to $3.0741 a gallon.

    -By Gregory Meyer, Dow Jones Newswires
    Dow Jones Newswires
    08-15-08 0945ET

  17. 17
    ram Says:

    Isn’t it too early for sarcasm – maybe? It’s amazing that the money herd doesn’t buy into cheap stocks. I really don’t understand the basis for IBD picks. They have been also unloading cheap E&P stocks – does IBD lead or follow?

  18. 18
    zman Says:

    Ram – I’d be more chipper if I were not: 1) venting cash and 2) on line with tech support for my desktop listening to the explain to me why the boot problem is not covered by my warranty or my service plan.

  19. 19
    Sambone Says:

    Z – Karl pretty much sums up how I feel about the overall market. The market is run by Hedgies.


  20. 20
    Fiveanddimer Says:

    Ram – IBD follows the money, like any pure momentum player. Right now, the money is flowing out of e&p and into financials. Whether that makes sense, is another question.

  21. 21
    zman Says:

    Agree with Five. And whether it makes sense or not is irrelevant. I don’t trade angry and I don’t fight trends. Not even tempted to add to these names. Bounces are just head fakes until something catalyzes the commodities. There is little catalyst for NG here beyond the threat of a hurricane. For oil we need OPEC and their tone has become much more constructive of late. Normally with falling demand they would have cut production by now. They are trying to drive oil lower and as it props the dollar (another way of looking at it at least). Also, there is a political angle for them.

  22. 22
    Fred Says:

    Great article Sam, thanks.

  23. 23
    zman Says:

    For JSS re GMXR

    I was thinking of buying the stock and then selling higher strike calls for the premium. If the stock goes down, you keep all the premium and have reduced your basis in the stock by that amount. If it goes up and you get called away, the stock will go to the buyer of the call but you keep the delta on the shares between purchase price and the strike price + what you got paid for the option.

  24. 24
    zman Says:

    Agree with the article Sam and during these transitions it makes it tough/impossible for the fundamental guy to make a $ as he (me) looks at the improving picture (on the volumes side, not price) and says “wow these guys are doing very well and they are so cheap”. Then you look at the piece above on CHK’s hedges and how they have not helped prevent a slide in the stock and you think, its the lemming principle and nothing more.

  25. 25
    zman Says:

    Oil through to a new 3 month low.

  26. 26
    zman Says:

    Refiners should be doing better in here but from what I hear, fund managers still hate the group.

  27. 27
    VTZ Says:

    Gold was under 800 as well so it’s broad-based commodity selling + dollar “strength”

  28. 28
    BirdsofpreyRcool Says:

    ha! fund mngrs are on vacation. unless a hurricane appears, no one is likely to do much of anything.

  29. 29
    VTZ Says:

    My opinion is that if gold cracks 790 and ~760 then it’s all the way to 700, whether that makes sense or not. 760 isn’t really strong support either so it could be more selling on the way… and none of the fundamentalists in gold would say there’s any reason for gold to be where it is.

  30. 30
    VTZ Says:

    I meant to imply that gold should be >1000, if that didn’t read correctly. 105 billion budget deficit in july isnt exactly bullish for the dollar.

  31. 31
    tater Says:

    As I am usually the bringer of doom and gloom, a positive comment coming from me is fairly odd, but here goes.

    The “commodity trade” negativity, though warranted, is appearing to me to be on a cusp, either it goes completely to hell, or it holds support. The dollar/gold trade seems to be saying the same thing. Either the dollar breaks above 80 and gold sells off to at least 700, or it soon does the opposite. The S&P rally looks to me to be almost over, as sentiment shows unwarranted bullishness (and TA leads me to believe it’s almost done), while all the above is happening.

    Now I am not coming right out and saying “buy oil, buy NG, buy gold, sell the SPY”, not yet. What I am saying is that I think that I am beginning to see the planets line back up in a manner that might signal that we really still are in lot of trouble economically, despite what the cheerleaders on TV say, and hard assets might still be the way to go (actually hard assets might see disinflation and an outright short may be the way to go).
    Not to mention that Sept is coming, and this all seems to time up for next month. My 2 cents.

  32. 32
    Sambone Says:

    Lemmings, yep, those guys have to protect their profits/bonus.

    I look at let’s say RIG. Stock down to 127 from a high of 163 (22%). Expected to earn $14.43 this year and $16.52 next year. (S&P has $17.59 for next year). Put a 15 multiple on it and you have $247 next year with a growth rate of 15%. It has a current p/e of 8. Impossible for a fundie guy to make $ is right. Boggles the mind.

  33. 33
    zman Says:

    Tater – I hear ya, I think a majority of the damage has been done in the trade. Oil is not going to $80 in my book. $110 maybe, and NG could go to $7for a short stint. This is the worst kind of day for expiration but it is what it is and I’m not into doom and gloom but an optimist at heart (I’m an options trader, I have to be). Am snooping around for some dt’s to keep me awake.

  34. 34
    zman Says:

    Sam – the key year on RIG is 2010. They have some swing in the numbers there which could take them north of $20 per share earnings. Before that things are mostly locked in so not only is it cheap but the numbers you quote are not going to go down. Talk about boggles the mind.

  35. 35
    Nicky Says:

    Morning all – staggering fall in silver last night – I came on late and mentioned it but by then it was 160 points off in one hour!! Gold held up very well considering…but still made it down to my lower target area of 775 and then bounced 20 points. It looks to me as if metals are now putting in a small sideways to up 3 wave bounce and we should then go lower..likely towards the 750 – 760 region and then I still expect a decent bounce most likely back to the 850 area in gold before turning lower again. I think it quite likely that gold could test 700 or lower on that next leg down.

    Expecting to see pretty much the same thing for oil – a lower move then a bounce which will be large, and then down again…

  36. 36
    tater Says:

    I looked back at what I wrote and I am equating shorting the market with happy days are here again. Wow. I think I have a problem.

    Nicky, if you are around, could you take a look at the rising wedge on the SPY and add some color if you have time.


    middle of first page

  37. 37
    VTZ Says:

    Well it seems like gold is consensus 700 shortly.

  38. 38
    JSS Says:

    Z, Thanks for #23. Good strategy.

  39. 39
    zman Says:

    Re Oil – Need to get $110 on the books, at $112 now, down $3. The Street is off as BOP said but I think if we hold $110 we could see Nicky’s big bounce.

  40. 40
    BirdsofpreyRcool Says:

    z – thanks for the shale link yesterday. just saw it.

    if you come across anything that lays out the depositional environment for the Sanish, let me know. I am hoping for “sea fan”… but worried it might be more intermittent.

  41. 41
    zman Says:

    JSS – the covered call is the safest option strategy of them and over time you can get the stock for free. Theoretically, I’ve never gone that far. Still looking for the trade of the day.

  42. 42
    zman Says:

    BOP – I hear your sea fan and would throw back glaciofluvial, lol. Depending on who you listen to it sounds spotty to ubiquitous. I choose to listen to the bigger players who say they see it here and there.

    Russian general threatens Poland with nuke attack as U.S. /Poland finalize anti missile batteries.

  43. 43
    JSS Says:

    I agree, those of us who’ve been long the last few months are due for one!

  44. 44
    BirdsofpreyRcool Says:

    glacialfluvial would suck.

  45. 45
    zman Says:

    BOP, hence the LOL. Apologies, mood a little dark today.

  46. 46
    BirdsofpreyRcool Says:

    (i was laughing… should have added that. by the way, can i use that sort of language here?? LOL)

  47. 47
    1520sbroad Says:

    jss – my 2 cents on covered calls – lots of ways to look at this but i like to look for relatively volatile equities that have heavily traded options.

    I have 2 stances – 1. Stocks that i like long term and feel are currently undervalued – i buy the stock and sell out of the money calls where the premium per month i take in is about 1% of my investment. $50 stock i look to bring in about 50 cents per share in premium per month, usually i go 3-9 months out. If the stock rises to the strike i let it go. 2. Stocks i am ambivalent about but have big options premium at the money. Buy the stock and sell the strike closest to the money usually for the next expiration month. In my mind GMXR fits this bill right now.

  48. 48
    apbd Says:

    Sam: Give us a quote. I need something to work on.

  49. 49
    1520sbroad Says:

    Also add that when writing calls it helps if you don’t mind either getting the stock called away or winding up with shares on options that expire worthless. That’s why i like to write calls on energy names – i like them either way.

  50. 50
    Nicky Says:

    Tater – absolutely great charts and excellent commentary too. Yes agree with you re gold, oil and the SPY. Are you wanting me to draw something on your SPY chart or just comment on here? But in essence yes re bearish wedge and I think it goes a touch higher – its likely to reverse when oil puts in its bounce…I am still thinking 1325 on SPX…then likely we go back down and retest the lows although it may only be a retest at this stage I think…

  51. 51
    zman Says:

    Thanks 1520, well said, just what I was thinking re covered calls and especially the being left holding energy stocks part.

    BOP – what kind of language? glaciofluvial or sucks? I think sucks is in the finance dictionary I have so I know that’s ok. Get too far into geology and you’ll strand my brain which is pretty “rocks for jocks”, especially on a Friday.

  52. 52
    Sambone Says:

    Even Z won’t get this one.

    “Ladies and gentlemen, welcome to violence, the word and the act. While violence cloaks itself in a plethora of disguises, its favorite mantle still remains… sex. Violence devours all it touches, its voracious appetite rarely fulfilled. Yet violence doesn’t only destroy, it creates and molds as well. Let’s examine closely then this dangerously evil creation, this new breed encased and contained within the supple skin of woman. The softness is there, the unmistakable smell of female, the surface shiny and silken, the body yielding yet wanton. But a word of caution: handle with care and don’t drop your guard. This rapacious new breed prowls both alone and in packs, operating at any level, any time, anywhere, and with anybody. Who are they? One might be your secretary, your doctor’s receptionist… or a dancer in a go-go club!”

  53. 53
    kiaora Says:

    tater….keep those charts coming. Immense help..

  54. 54
    VTZ Says:

    Is that Species or something?

  55. 55
    kiaora Says:

    nope…my inlaws

  56. 56
    JSS Says:

    Z, thanks again for the trade plays. At about what price were you thinking of for the GMXR stock entry? After a few up days, it’s down quite a bit today along with about everything else.

  57. 57
    BirdsofpreyRcool Says:

    sam – sounds like an Al Pachino scene.

  58. 58
    Sambone Says:

    Bird – Nope

  59. 59
    BirdsofpreyRcool Says:

    sam – i looked it up… wow. GOOD ONE.

  60. 60
    zman Says:

    Nicky – we need to get you a shareable charting platform like Taters.

    Sam – no idea, sounds like a vampire flick

    BOP – no sharing of your cheating, lol

    JSS – given this market, not so much of a how much as a when if you get me

  61. 61
    BirdsofpreyRcool Says:

    (sorry… have to run out… couldn’t stand the suspense)

  62. 62
    Sambone Says:

    Z – Hint, Quentin Tarantino is going to make a remake. Britney Spears might star in it.

  63. 63
    apbd Says:

    Boogie Nights

  64. 64
    zman Says:

    Watching CL/u8 trading lock step with SLB for that dt. hmmm.

    Still no idea movies.

    Other system down on bad motherboard. Feels like a Monday, TGIF.

  65. 65
    Sambone Says:

    Faster, Pussycat! Kill! Kill! (1965)

  66. 66
    Sambone Says:


  67. 67
    zman Says:

    nice Sam…never ever would have gotten that.

  68. 68
    kaman Says:

    Britney Spears in a Quentin Tarantino flick, huh?…man, that’s balm for my sore mind on an ugly opex Friday.

  69. 69
    zman Says:

    HAL falling into the daytrade possible category too, same as SLB, better spreads on the 42.50 calls.

  70. 70
    zman Says:

    SD officers and directors buying shares

  71. 71
    zman Says:

    NG went postive, wow.

  72. 72
    tater Says:

    Nicky, Kiaora –

    Thanks, appreciate it. Nicky, that was what I was hoping for, just some critique and your opinion. I would second the move for you to sign up at stockcharts. Also, please feel free to be brutal. I don’t want the proverbial smoke up my butt, if and when you see something you disagree with, please, please point it out. This is about making (and not losing) money. My self-esteem is good to go.

  73. 73
    zman Says:

    Tater – do you still see a pullback on the $ as per your 8/10 comments on chart 4b?

  74. 74
    Nicky Says:

    I do Z – there is a gap fill at the 74.95 area for a start…

  75. 75
    tater Says:

    Yes. That is the weekly chart, and without getting too technical, the top squiggly line (the Bollinger Band) is a measure of standard deviation. Basically, on the weekly chart the dollar’s move up is too quick in relation to past moves. It is beyond the standard deviation in movement.
    Not always set in stone, more of a guide. For me, though I am not versed in Forex trading, I have to believe it has something to do with funds reversing short positions. Once they clear their shorts (clear their shorts?) we will need to see real buying of the dollar for it to continue its pace up. Maybe that happens, but I doubt it will maintain the present pace.

  76. 76
    Sambone Says:

    IGOETI, Georgia (AFP)–A convoy of 10 Russian armored personnel carriers
    Friday moved deeper into Georgia before halting just 40 kilometers from
    Tbilisi, an AFP reporter said.
    The convoy, with a Russian flag waving on the lead vehicle, travelled about 25
    kilometers from the city of Gori in the direction of Tbilisi, before stopping
    near the village of Igoeti.
    Half of the vehicles then split from the others and headed northeast towards
    the village of Lamiskana.
    Officials said earlier Friday that Georgian authorities were negotiating with
    Russian commanders for the handover of Gori.
    On Thursday Georgian officials said they had been told the Russian forces
    would depart Friday, remarks that were echoed by the French ambassador and a
    European Union parliament delegation.

    Dow Jones Newswires
    08-15-08 1204ET

    BTW, “W” just went to Crawford for vacation.

  77. 77
    zman Says:

    Wind still sailing.


  78. 78
    zman Says:

    Other Wind


  79. 79
    zman Says:

    APC, NFX, join SD in the ranks of the barely green.

    Refiners slightly stronger across the board.

  80. 80
    BirdsofpreyRcool Says:

    ZOLT… that is one weird CEO… you never know what that company is going to do.

  81. 81
    zman Says:

    Wow, APC very active all the sudden, see no news.

  82. 82
    BirdsofpreyRcool Says:

    yeah… heard they were buying GMXR.

    (just kidding)

  83. 83
    zman Says:

    BOP – you know I’m bored when you see me mention wind. But seriously, the site is about energy and when the other areas are down, the wind and solar can be an interesting and in the past an occasionally profitable diversion.

  84. 84
    zman Says:

    BOP – Hackett needs more resource plays and a buy for a reasonable 50% premium would leave a stock like APC higher after the announcement in a normal market given the accretion.

  85. 85
    BirdsofpreyRcool Says:

    no argument from me! ZOLT should work. there is definitely a shortage of carbon fibre providers and ZOLT is a pure-play. but, the company itself is wildly unpredictable. just MHO, of course.

  86. 86
    BirdsofpreyRcool Says:

    APC… that was my #1 pick as the buyer for GMXR, so totally agree with you

  87. 87
    BirdsofpreyRcool Says:

    last comment on ZOLT… it’s one you can probably buy when it’s this low, but you can’t sit on it.

    ‘course, these days, buy-and-hold doesn’t work for anything.

  88. 88
    zman Says:

    That Zolt CEO’s favorite show is Living with Ed if that tells you anything.

    Re APC, I shouldn’t say Hackett is not into resource plays, he is, its just not obvious yet.

  89. 89
    zman Says:

    Seriously, somebody must have said something on the APC as it is up 2.5% now with the group mostly down 2.5% and looks fairly active on this slow day.

  90. 90
    ddaley Says:

    Takeover rumors

  91. 91
    zman Says:

    DD – should see a deal in the space soon.

  92. 92
    zman Says:

    My thought would be COP for APC.

  93. 93
    Sambone Says:


    Energy companies were by far the worst-performing group in the Standard &
    Poor’s 500 Friday as crude-oil futures slid to a fresh 3 1/2-month low and the
    Organization of Petroleum Exporting Countries issued a report indicating world
    stockpiles will grow.
    Also dragging down the sector is the stronger dollar, which chased investment
    funds out of commodities.
    The S&P 500 energy sector was recently down 1.76%, with losses in oil
    companies partially offset by gains by refiners.
    Hess Corp. (HES), National Oilwell Varco Inc. (NOV) and Occidental Petroleum
    Corp. (OXY) were all down more than 3% in recent trading. Coal companies
    Peabody Energy Corp. (BTU), Consol Energy Inc. (CNX) and Arch Coal Inc. (ACI) –
    which isn’t a S&P 500 member – were also down more than 3%; the trio has seen
    volatile trading of late amid the fluctuations in crude prices.
    Refiners were among the only energy companies in the S&P 500 that were up,
    with Sunoco Inc. (SUN) rising 2.5%, Tesoro Corp. (TSO) climbing 2.4% and Valero
    Energy Corp. (VLO) up 1.6%. Refiners haven’t benefitted from surging crude
    prices, as they haven’t been able to fully push through to consumers their
    increased costs of buying oil when selling their refined products.
    In its monthly report, OPEC said current production by its member countries is
    well above expected demand for OPEC crude, a trend that the group said could
    lead to a potential sharp build in crude-oil inventories.
    -By Jennifer Hoyt, Dow Jones Newswires (Gregory Meyer contributed to this report.)

    Dow Jones Newswires
    08-15-08 1244ET

  94. 94
    Sambone Says:

    By Lananh Nguyen

    LONDON (Dow Jones)–Crude oil inventories are likely to swell, putting further
    downward pressure on prices, if production continues at current levels while
    consumption in the world’s advanced economies continues to decline in the wake
    of recession.
    Inventory levels are a key indicator of the balance between global supply and
    demand. Any significant increase could force crude prices lower and could also
    prompt producers to consider trimming their output.
    “We anticipate that OECD (Organization for Economic Cooperation and
    Development) inventories will build strongly and start the fourth quarter at
    levels towards the top of the historic range,” said Gareth Lewis-Davies, an
    analyst at Dresdner Kleinwort bank in London.
    Production from the Organization of Petroleum Exporting Countries has
    increased significantly this year, reaching 32.6 million barrels a day in July,
    OPEC said in its monthly oil market report Friday.
    Crude oil futures prices have already declined nearly 25% from their mid-July
    peak to the lowest levels in three months as investors grow increasingly
    concerned about declining demand.
    “We predict that the price retrenchment will continue as the prospect of a
    return to double-digit oil prices grows,” Lewis-Davies said.
    If global oil production remains steady, OECD stockpiles could rise to satisfy
    56 days of forward cover by the end of the year, compared with the previous
    five-year range of 50.3 days to 53.3 days. Such a build would indicate that
    demand for crude is starting to lag supply.
    Analysts at U.K.-based consultancy KBC Market Services in a recent report also
    forecast global oil inventories will undergo a “sharp turnaround” and rise by
    1.2 million barrels a day in both the third and fourth quarters.
    “Judging by the demand destruction in North America and Europe, plus the
    (expected) post-Olympic hangover in China…I think (inventories will) build,”
    said Stephen Schork, editor of the Schork Report, an energy newsletter, in
    “This year, with continued restraint in refinery throughput and extra Saudi
    supply arriving onshore, we expect flat or building crude inventories,”
    analysts at Lehman Brothers said in a research note.
    A potential stockbuild could put the 13 members of the Organization of the
    Petroleum Exporting Countries in a tough position ahead of their next
    policy-setting summit Sept. 9 in Vienna. There, OPEC producers will need to
    weigh supply and demand concerns regarding crude oil markets against the
    deleterious effects triple-digit oil prices have had on the world economy.
    “The group’s likely main concern is to respond quickly in the event of a
    further sharp fall in oil prices if this is due to an excess of supply,” said
    the KBC analysts.
    The oil producer bloc will be wary of pumping too much crude if prices
    continue to fall, said Thomas Stenvoll, energy strategist at UBS in London.
    “(OPEC) was badly hurt by oversupplying the market at the wrong time (during
    the 1990s),” Stenvoll said. “OPEC is going to be more risk-averse, i.e. holding
    back supply rather than oversupplying it to placate the economy.”
    Saudi Arabia, the world’s largest oil exporter, said earlier this summer in
    two separate announcements it would raise production by a total of 500,000
    barrels a day to 9.7 million barrels a day in July, the highest level in many
    years, to meet new customer demand. This increased supply began to reach
    consumers in recent weeks.
    But if Saudi Arabia and other OPEC members maintain current production levels,
    they could risk creating a glut as OECD demand stagnates and consumption in
    emerging economies cools slightly.
    “Risks to the outlook for the world oil market appear to be on the downside.
    With current OPEC production well above the expected demand for OPEC crude,
    there is potential for a sharp build in crude oil inventories,” OPEC said.
    Mike Wittner, global head of oil research at Societe Generale suggested OPEC
    would need to trim inventories by 1 million barrels a day in the fourth quarter
    in response to a decline in demand and falling prices.
    “I see the need for OPEC to cut production, or risk flooding a slack market
    with crude,” said Lewis-Davies at Dresdner.
    OPEC rolled back production twice in 2007, reducing its output by a total of
    1.5 million barrels a day and curtailing its exports onto the international
    The International Energy Agency, the OECD’s energy watchdog, also expects oil
    supply and demand fundamentals to ease.
    “Over the next 18 months there appears to be the potential for a modest build
    in the supply cushion due to the combination of weaker economic growth and a
    concentration of new projects in OPEC and non-OPEC countries coming on line,”
    the IEA said in its medium-term oil market report.
    “There is the potential for an easing of market tightness,” IEA analyst David
    Martin told Dow Jones Newswires.
    But supply disruptions, robust emerging market demand and project delays could
    put paid to this scenario, some analysts said.
    Disappointing non-OPEC supply growth and persistent strong demand in
    developing economies will continue to keep the market tight, Barclays Capital
    analysts said.
    “Saudi’s output increase has been easily absorbed in the market and is
    unlikely to help build any inventory in an environment where there is a sharp
    contraction in non-OPEC supply,” the Barclays analysts said. They highlighted
    IEA data showing OECD inventories building at their lowest pace in 25 years
    during the second quarter.
    Stenvoll at UBS forecast crude oil inventories would swell by 750,000 barrels
    a day in September and October, but said the inventory build could be trimmed
    by pipeline outages in Georgia due to that country’s military clashes with
    Nevertheless, lower demand and improving supplies could help swell inventories
    by the end of the year, pressuring prices to come down further.
    According to a Dow Jones Newswires poll of 31 economists compiled in July,
    many forecasters expected prices to trade significantly below their peak levels
    by the start of 2009. Brent crude oil futures prices in the first quarter of
    2009 were forecast to average $115.50 a barrel, while the price estimate for
    West Texas Intermediate crude – which is particularly relevant in North America
    – was seen at $116 in the first quarter of next year.
    -By Lananh Nguyen, Dow Jones Newswires (Nick Heath and Benoit Faucon in London and Hans Bentzien and William Launder
    in Frankfurt contributed to this report.)

    Dow Jones Newswires
    08-15-08 1250ET

  95. 95
    Sambone Says:

    Bears Sink Teeth Into Most Commodities


    KANSAS CITY — Commodity bears are out in force, emboldened by a stronger U.S. dollar and weakness in key inflationary markets, taking many futures markets to fresh lows, traders and analysts said Friday.

    The greenback has been on a tear recently, rebounding to seven-month highs Friday and hitting a new six-month top against the euro, bolstered in part by the Reuters/University of Michigan consumer sentiment survey that showed some improvement as it rose to 61.7 in August from 61.2 in July.

    Crude oil continues to be hurt by speculative liquidation, taking the September delivery to nearly a 3 1/2-month low and off about 24% from its all-time high of $147.90 hit July 11. At 11:30 a.m. EDT, the contract is $3.34 lower at $111.65 a barrel on the New York Mercantile Exchange — nearly a 3% decline on the day.

    “The focus has been on the strength of the dollar and relative economic weakness outside of the U.S., negative demand implications and just a continuation of widespread commodity weakness,” said Dave Rinehimer, director of Citi Futures Perspective in New York.

    The major commodity indexes are sharply lower. The Dow Jones-AIG Commodity Index is down 4.342 at 186.380, after reaching nearly a seven-month low. The Reuters/Jefferies Commodity Research Bureau Index is 8.93 lower at 380.52, after touching a 3 1/2-month low Friday.

    The selling interest is tugging at nearly everything from crude oil to gold to the grain markets in Chicago, which fell sharply at the opening bell.

    “It’s like catching a falling knife. Any place you try to stop it you’re subject to sharp cuts,” said Don Roose, grain analyst and president of U.S. Commodities in West Des Moines, Iowa.

    As energy prices rallied to their highs, grain futures also rose because of higher fuel costs and inputs such as fertilizer. Now that energy prices are falling, grain futures are tumbling on speculative fund liquidation pressure, he said.

    December gold on the Comex division of Nymex is down $29.50 at $785.00 an ounce after diving to a 10-month low.

    Open interest in the Chicago grains remains large, which leaves those markets susceptible to further liquidation, Roose explained.

    Chicago Board of Trade September corn is down 24 1/4 cents a bushel at $5.33 1/2, while November soybeans are 59 cents lower at $12.15. CBOT September wheat is 31 cents lower at $8.33 1/2 a bushel.

    The softs markets are also feeling the heat from commodity sales, analysts said.

    September arabica coffee is down 310 points at $1.3205 a pound after diving to a three-month low, with December off 305 points.

    “The rise in the dollar’s hurting us,” a New York desk broker said. “Speculators and day traders sold us down into stops .. but mainly we’re doing a lot of Sep-Dec rolling and spreading.”

    September cocoa futures are down 2.75% Friday on the speculative selling, trading near two-month lows, as the rebounding dollar and commodity selling pressures prices during the seasonal lull between the West African harvests, said Boyd Cruel, senior softs analyst at Alaron Trading.

    The slide in crude oil and commodity sell-off is also prompting buying interest in the stock market, as most of the major indexes are trading higher. The Dow Jones industrial average is up 79 points at 11,693.20.

    As traders unwind their long-commodity, short dollar and equity trades, there is nothing yet to suggest that trend is nearing completion.

    “With the markets making new lows for their moves and the dollar index making new highs, there’s no indication of a bottom on the commodity front or a top in the dollar index,” Rinehimer said. “The markets have been in a liquidation phase, with open interest continuing to decline, and those factors are still in play.”

    —By Tom Sellen, Dow Jones Newswires;

  96. 96
    Sambone Says:

    Found this, interesting.

    Hopefully, this is not going to be deja vu all over again, but the 1982 Penn Square collapse has always been attributed to the drop in oil prices from 97.68 (inflaton adjusted) in 1980 to 70.91 in 1982, about a 27% decline, after more than doubling from 1978 to 1981, but this was also around the time of the 19% Volcker interest rates.(See article and price chart below)

    Iran weakened by the revolution was invaded by Iraq in September, 1980. By November the combined production of both countries was only a million barrels per day and 6.5 million barrels per day less than a year before. As a consequence worldwide crude oil production was 10 percent lower than in 1979.

    The combination of the Iranian revolution and the Iraq-Iran War cause crude oil prices to more than double increasing from from $14 in 1978 to $35 per barrel in 1981.

    Annual Average Domestic Crude Oil Prices
    U.S. Average
    (in $/bbl.)
    Year Nominal Inflation Adjusted 2007
    1946 $1.63 $17.66
    1947 $2.16 $20.75
    1948 $2.77 $24.76
    1949 $2.77 $24.99
    1950 $2.77 $24.74
    1951 $2.77 $22.93
    1952 $2.77 $22.41
    1953 $2.92 $23.40
    1954 $2.99 $23.92
    1955 $2.93 $23.47
    1956 $2.94 $23.25
    1957 $3.14 $24.00
    1958 $3.00 $22.33
    1959 $3.00 $22.11
    1960 $2.91 $21.16
    1961 $2.85 $20.48
    1962 $2.85 $20.24
    1963 $2.91 $20.43
    1964 $3.00 $20.78
    1965 $3.01 $20.51
    1966 $3.10 $20.52
    1967 $3.12 $20.10
    1968 $3.18 $19.61
    1969 $3.32 $19.45
    1970 $3.39 $18.77
    1971 $3.60 $19.10
    1972 $3.60 $20.48
    1973 $4.75 $22.80
    1974 $9.35 $40.67
    1975 $12.21 $48.71
    1976 $13.10 $49.46
    1977 $14.40 $51.02
    1978 $14.95 $49.27
    1979 $25.10 $73.60
    1980 $37.42 $97.68
    1981 $35.75 $84.58
    1982 $31.83 $70.91
    1983 $29.08 $62.74
    1984 $28.75 $59.47
    1985 $26.92 $53.76
    1986 $14.44 $28.29
    1987 $17.75 $33.56
    1988 $14.87 $27.05
    1989 $18.33 $31.75
    1990 $23.19 $38.02
    1991 $20.20 $31.86
    1992 $19.25 $29.47
    1993 $16.75 $24.92
    1994 $15.66 $22.69
    1995 $16.75 $23.62
    1996 $20.46 $28.01
    1997 $18.64 $24.95
    1998 $11.91 $15.70
    1999 $16.56 $21.30
    2000 $27.39 $34.16
    2001 $23.00 $27.92
    2002 $22.81 $27.22
    2003 $27.69 $32.34
    2004 $37.66 $42.80
    2005 $50.04 $54.99
    2006 $58.30 $62.11
    2007 $64.20 $66.40
    2008 Partial $97.98 $98.66

  97. 97
    BirdsofpreyRcool Says:

    if e&p stocks get any lower, it would be just plain stupid for the MOCs to not use the cash on their BS to buy companies. Better than buying their own stock (in the face of declining reserves) and/or paying it out to Washington.

    i have to think m&a is going to pick up. soon.

  98. 98
    BirdsofpreyRcool Says:

    add HXL to the list of wind-exposed companies. you get some aerospace thrown in too, but what the heck.

  99. 99
    zman Says:

    Thanks BOP. Needed a BOP for the portfolio this month.

  100. 100
    zman Says:

    Dollar index at 83.84, up another 0.8% today. Looks to me like it turns soon around 84.50 or is free to run quite a bit higher, say 90. While I don’t profess to be a TA genius I did get my start in a TA shop (summer intern) and then pouring over daily graphs from O’Neil for a PM looking for patterns so I am familiar with the basics. To me, the dollar index chart is close to a pretty important point where strength through that point will beget further strength…but only if it can crawl above that point.

  101. 101
    Eagle Says:

    Going back to post 47: 2. Stocks i am ambivalent about but have big options premium at the money.

    Do you have a hurdle level for what you consider a big option premium?

    Sorry for the delayed question, Job keeps getting in the way of the fun stuff.

  102. 102
    Sambone Says:

    92L, looks to track west coast Florida


  103. 103
    JSS Says:

    Thanks ‘1520 for info @ #47

  104. 104
    Nicky Says:

    Z – I must be looking at another dollar index as the one I am looking at is at 77.40 area today?

  105. 105
    zman Says:

    Nicky – I’m looking at DU/Y which is the CME dollar index.

  106. 106
    zman Says:

    If you have a free live source for this that would be great … always looking to knock out another monthly exchange fee.

  107. 107
    zman Says:

    Feeling their oats


  108. 108
    1520sbroad Says:

    #101 – hurdle rates for at the money calls. Sorry for the delay – had to eat lunch.

    Anything north of 6% for an at the money for one month is interesting to me.

    2% is about what an at the money call on the SPY will get you most of the time. If things are uncertain, market is down, Bear Stearns goes bust etc. This goes higher. I don’t track SPY much but i have seen it close to 5% for one month at the moneys.

    Right now in the energy patch a couple of interest:
    XLE sept 71’s yield about 4.2% just on the call premium $3.05 on $70.90. Take out the company specific risk – up or down and you get lower call premiums.
    SWN sept 35’s yield about 7% just on the call premium. $2.50 on $35.05. Add some company specific risk – up or down and you get more premium.
    GMXR sept 60s yield about 8.2% just on the call premium 4.90 on $59.80. Add some more company specific risk – up or down and you get a ton of premium.

    Obviously in the energy market there is a lot of uncertainty at the moment and folks willing to take both sides – some think it is going back up, some think it is going straight down.

    In a former life i worked on a team that traded an in the money option strategy at Citi. We used to try to find stuff that we could write way in the money options and still make 1% a month. We used to try and get as much premium in the door as possible on day 1. This takes a lot of risk off the table in terms of how far the stock can fall and you still get called and make your 1% a month.

    #103 – no problem

  109. 109
    Eagle Says:

    Thanks a bunch 1520. Have the theoretical strategies from Grad School, but the real world illustrations help tremendously in bringing it to life.

  110. 110
    1520sbroad Says:

    Eagle – no problem. happy to help, let me know if you need another example or two. covered calls are a good idea to have in your bag. can be helpful when it seems like everything is going to hell in a hand basket.

  111. 111
    zman Says:

    1520 – speaking of that just did some covered calls on Sept 50 CHK’s, don’t really see the need to ZTRADE that kind of stuff. Have you played the “Friday Of to Monday After Expiration” trade on written calls. We sometimes get a step down after in the morning on Monday’s that seems like more than just losing the time value of the weekend. Any thoughts.

  112. 112
    zman Says:

    Weird, $1.20, three minute jump on crude into the close.

  113. 113
    kyleandy Says:

    sam that is one ugly track right over my house. this morn crown weather had it going much more northward.

  114. 114
    1520sbroad Says:

    i have been a serial writer of calls on CHK. i have 55s for sept written. here’s to them getting called.

    you are talking about selling a call for $1.10 on friday afternoon one month out and then it immediately goes to .95 on monday morning. You could buy it right back and pocket the .15?

    i have watched what you are talking about but never tried to catch it. i don’t typically go that short. i think what you are seeing is people repositioning themselves one month further out on the day of expiration (friday) and the relative lack of call purchasers showing up on the monday.

    An ex-div date around options expiration day can make option premiums get weird too.

    The other thing that has happened recently is more and more option chains are being traded in $1 increments which crushes out some of the squirelly premiums from day to day.

  115. 115
    JSS Says:

    1520/Z, my undeveloped brain just isnt wrapping around the options spread/premium/%-per month concepts you’ve been discussing today. Detailed examples usually help me alot with these types of concepts. Any links to some options sites with expamples for these types of options strategies?Thanks!

  116. 116
    Sambone Says:

    Models now shifting. This mother could really build and go anywhere.



  117. 117
    zman Says:

    1520 – thanks for 114. You are going to be a big help around here as I’m an energy guy first, then a stock guy, then an options guy. I’ve done some strats in the past that worked for a time, then didn’t. KISS is applied to all my option thinking despite the option classes in undergrad that made it all look so good.

    JSS – I’d suggest optionsexpress where they have free seminars and you can paper trade which is a good idea for learning as this is a marathon, not a race.


  118. 118
    1520sbroad Says:

    #115 – options industry council is a decent source too. They have an online covered call calculator that works fairly well.

    http://www.optionseducation.org and throw covered calls in the search box.

    For an at the money call:

    just think of the call premium you receive when you write the call as a div payment. call premium/price of stock when you bought it = Call premium yield.

    then divide this call premium yield by the number of months until expiration = call premium/month.

  119. 119
    tater Says:

    Jim Wychkoff just wrote a bearish piece on the commodities (pay site). Though he seems like a nice enough guy, and what he writes is very well thought out, his timing is usually awful and he is therefore my all time favorite anti-barometer. Looks like it’s time to buy.

  120. 120
    zman Says:

    SD moving now too. Hmmm

    Looking at that storm:
    This link will give cartoon tracks once they upgrade it to a TS this weekend. Island probably play hell with it but you never know. Commodities could see a big cover if it steers towards NOLA.

  121. 121
    Sambone Says:

    It could.

  122. 122
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude oil futures slid Friday, battered by a stronger
    dollar and forecast of ample world supplies.
    Light, sweet crude for September delivery settled down $1.24, or 1.1%, at
    $113.77 a barrel on the New York Mercantile Exchange. October Brent crude on
    the ICE futures exchange closed at $112.55 a barrel, down $1.13.
    Nymex crude is 22% lower than its $145.29 settlement peak, reached six weeks
    ago. After falling to $111.34 earlier in the session, futures staged a last
    minute rebound before the pit session closed at 2:30 p.m. EDT. Traders said the
    bounce came as options on September crude futures expired, triggering
    last-minute volatility.
    Crude has dropped in eight of the last 10 sessions on concerns the balance of
    supply and demand is beginning to ease. The Organization of Petroleum Exporting
    Countries said “risks to the outlook for the world oil market appear to be on
    the downside” in its monthly market report Friday, and said a “sharp build” in
    crude oil inventories is a possibility.
    In July, OPEC oil output averaged 32.6 million barrels a day, the producer
    group said, up nearly 236,000 barrels a day from June thanks to added flows
    from Saudi Arabia, Iraq, Nigeria and other exporters. OPEC’s next policy
    meeting is scheduled for Sept. 9 in Vienna.
    “The important question to ask is what happens at their next production
    meeting? At this point, with prices where there are, we think they are going to
    leave production unchanged,” said James Crandell, an energy analyst at Lehman
    Brothers in New York.
    The dollar also reached a fresh six-month high against the euro, which was
    recently $1.4676 from $1.4809 late Thursday. Oil’s rise earlier this year
    coincided with historic weakness in the greenback, as investors sought a hedge
    in hard assets. That strategy is now unwinding.
    “Every day the dollar sunk, crude oil would automatically have to make a cost
    of living adjustment. Now that you’ve got the reverse it’s a two-edged sword,”
    said Walter Zimmermann, an analyst at ICAP/United Energy in Jersey City, N.J.
    “That short-dollar, long-oil spread has turned into a nightmare.”
    Traders debate how low crude will fall. Goldman Sachs identified $105 a barrel
    as a floor as industry costs accelerate. The Wall Street bank and energy
    trading powerhouse sees $145.30 oil three months from now.
    Few are willing to predict prices below $100.
    “There is much more upside potential to the market than there is downside
    here,” said Peter Van Cleve, president of brokerage T.W. Energy Consulting in
    Kansas City, Mo. “We could go down 10, we could be back up 40.”
    Still, the political jitters that have fired up markets in the past failed to
    do so in recent days. Despite Russia’s offensive inside Georgia, prices ended
    down 1.2% for the week.
    Front-month September reformulated gasoline blendstock, or RBOB, settled down
    5.18 cents, or 1.8%, to $2.8602 a gallon. September heating oil rose 2.00
    cents, or 0.7%, to $3.1191 a gallon.

    -By Gregory Meyer, Dow Jones Newswires
    Dow Jones Newswires
    08-15-08 1525ET

  123. 123
    1520sbroad Says:

    reverse your evolution and that is me – i went stock+option=covered call and then energy.


    expiration day is also an excuse for guys at option desks to fight for nickels. A nickel might not matter to you but it does to them. This can lead to some funny stuff in the next month set of options as far as bids and asks go.

  124. 124
    JSS Says:

    Thanks guys for #s117/8. I have two older options books which cover these specific issues but obviously not well enough for me to get a firm understanding. I will check these sites out. Thanks again.

  125. 125
    ddaley Says:

    and Z,

    Discussion on briefing, (I assume that paraphrasing is allowed?), about UNG. That a five (5 & v )wave count down has been completed, (this analysis came complete with chart), with yesterday’s low. Upside target is wave 4 initially, and that would be 44.

    BIG caveat mentioned, however, the possibility of a “market dislocation”, as in a blow up margin call for NG.
    Bought at 39.7 and the assumption of a gap up open on Monday.

    I was about to write something about how dreary the prospects are, which we have all been reading for the past 4 weeks.

  126. 126
    zman Says:

    Tater – always good to have those barometer folks out there. Hopefully I’m not one.

    Calling domesticbeer thirty 10 minutes early.

  127. 127
    Sambone Says:

    Weather, my prediction. Fay will be born today, GOM Tuesday.

  128. 128
    ddaley Says:

    Biggest call buying in UNG today for SEPT is 38, 40 and 44. Largest OI is the 40

  129. 129
    zman Says:

    If you think a gap like that occurs then SD is probably the bet I’d take (am actually taking at this point), but they will all run. I think the possibility of E&P M&A activity is climbing with each passing day.

    For a play on a damaging spinner the OII is beaten and bashed. Straight from 82 to 54.

  130. 130
    zman Says:

    Rumor has it PVA has another big Haynesville well days away from completion, stock getting socked today.

  131. 131
    zman Says:

    Ok, now really beerthirty!

  132. 132
    ddaley Says:

    Nat Gas futures in a three year support zone,(8090), although all of 2007 was below here. And the Euro, (the only real reason for a dollar rally), is in a support zone back to Nov. 2007

  133. 133
    tater Says:

    Z – Not by a longshot! What I admit that I will do on occasion is to see when and if there is a disconnect between fundamentals and price (technicals). If I happen to notice a situation where the market is ignoring good sound fundamental reasoning (you!) then I will become emboldened to dive headfirst with a technical trade. That’s probably why I am playing with SLB and RIG at present. Great companies. Awful stocks (recently). But as usual, back to cash and will await a new set-up on Monday. Have a good weekend.

  134. 134
    Nicky Says:

    DD – I am following nat gas rather than UNG but they should be moving together. Yes re v of v but still too early to say unless we move above 8.736 I would say. Its possible that v of v completed as an ending diagonal but you can see the pattern is not clear which is why I will still allow for another low out there until we get above some key levels.

  135. 135
    ddaley Says:

    Thanks, see my email

  136. 136
    bhr5491 Says:

    TS Faye is official – looks headed to FLA

  137. 137
    isleworth Says:

    Sambone – nice call . Your baby was born – now head it a little further west than current track pls

  138. 138
    Bleemus Says:

    Was out most of the day so just checking in.

    Z – For a free look at what the dollar is doing take a look at UUP. If you don’t have $DXY index from your broker it is an easy way to see how the dollar is doing against a basket of other currencies.

    UUP seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Long US Dollar Futures index. The index is comprised solely of long futures contracts. The futures contract is designed to replicate the performance of being long the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

  139. 139
    Bleemus Says:

    Also, tons of forex dealers have free quotes on their home page as well.

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