Wrap – Week Ended 05/15/09 (In Progress)

Holdings Watch:

$10KP is now at $28,500; 81% cash

Closed trades this month:

• (HK) - Sold the HK $24 May Calls HKEO for $2.25, up 269%.
  

• (CLR) - Sold half (10) of the CLR May $25 Calls for $2.10, up 106% to my average cost.

• (RRC) - Sold the (10) $42.50 calls taken last week for $2.45, up 242%.

• (SWN) - Sold the remaining 14 $40 calls for $1.90, up 273%.

• (WRES) - Sold 25 (half) my June $2.50 Call position for $0.60, up 277% with the stock at $2.85. I didn’t expect this kind of rally in the name and didn’t see a reason to keep the exposure as high going into earnings today.

• (HK)  - Sold the 20 HK $26 May calls purchased during the conference call for $0.90, up 118%. I don’t do a lot of trades with the intention of them being “day trades”. But that one did what I wanted.
  

• (EOG) - Sold the EOG June $70 calls for $8.40, up 169% withe stock up $4.65 on the day at $75.66.
  

• (CLR) - Sold half (5) of my remaining May CLR calls for $3.70, up 383% since entry last week.

• (PXD) - Sold all (10) PXD $25 May Calls (PXDEE) for $4.00, up 220% since purchase yesterday. Good earnings report, good conference call, will reposition on a pull back into longer dated calls here.
  

•  Sold those 30 HK May calls taken yesterday for $1.05, up 57% with the stock at $25.30.
  

• Sold (5) of the June HK $25 for 3.00, bought yesterday for $2.00, up 50%.
  

• Sold (5) of the June EOG $80 Calls for 3.70, added yesterday for $2.85, up 30%.

• Sold (10-all) HAL June $22 Puts (HALRV) for $1.50, up 21%. Got tired of fighting the tape here, will revisit the idea soon.

• Sold the CRR June $35 Puts for $2.70, up 11%. Ditto the reason above.

• HK $24 and $26 May Calls taken this week expired worthless.

• CLR $30 Calls taken Wednesday after the storage numbers expired worthless.

Wrap Comments:

1) Not A Great Week For Energy. After the run we've had you have to expect a bit of a pull back. E&P and Oil Service lagged the most but are still up on the year and outperforming the broad markets. The persistent strength of the OIH continues to mystify and I blew out of the June HAL and CRR puts slightly in the black as seen above. The May HALs were not so fortunate and while I continue to see tough times ahead for the OIH I find a growing chorus (in just the last week) of analysts who are sounding a more cautious tone as well. Nothing has changed in terms of fundamentals; those have been weakening all along. But the analysts are finally admitting that earnings expectations for quarters 2 through 4 will continue to weaken and that in most cases, 2010 will see flat to down earnings vs 2009. I will revisit the idea of puts here when the stocks are less of a go to sector whenever the Street decides to have a green day.
 

2) Gasoline Showing Signs of Life (Possible Head Fake In Motion).  Refining margins have continued to hold their own through the recent upward move in crude. Last week's EIA report showed a large, and unexpected draw down in inventories but it was production and not resurgent demand that was to blame. If refiners step up utilization as is normal this time of year it is likely that we will see a rapid bloat in gasoline stocks this summer and falling wholesale prices. This would like have a dampening effect on crude but more so on gasoline and therefore result in subdued margins, especially given the already bloated inventories of distilltes. Until we see signs that gasoline and domestic diesel demand are rebounding I am likely to  continue to avoid the independent refining group,.

....more comments in a bit ...