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Linn Energy, LLC (LINE) Message Board

  • dem335 dem335 Oct 22, 2009 12:01 PM Flag

    line options no premium

    with exdiv day coming, the nov 22.5 (and the dec 22.5) have virtually no premium to the stock price even thou one could buy the option and exercise on 11/2 to get the dividend. this is a good time to buy the options as line's dividend rate is higher than a lot of peers in the mlp nag gas area (like mwe, ngls)

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    • I'm thinking it makes no sense to exercise 25 calls today unless the stock closes above 25.63

      In that case you would get a "free" divey less whatever you payed for the option

    • I'm curious to see how these options are played. If they are not exercised first thing in the morning, then perhaps after hours (since the window on options doesn't close until 4:30 pm, I believe).

      But really, if you want the distribution, just buy the stock, don't pay for extrinsic (time) value.

    • I closed out my 10 nov options by selling the options and then buying the stock. taking advantage of some swings in price of line today.

      the thing to watch either tomorrow or the next day is the volume of the nov 22.5 calls (open interest is 987) and the dec 22.5 open interest only 58.

      in the past I have seen the volume on these options hit 5 times the open interest. net result no open interest on exdiv day 11/4

    • yeah, LINE has been a monster. I think you've got the energy angle plus the fairly high and secure distribution - if you think GOOG and AAPL are too pricey and bonds don't have enough juice, try your hand at LINE and other MLPs. I think LINE will hold up much better under a correction, as well.

      I've done a little w/ MLPs this year, wish I'd done almost everything in this space. I didn't think about asking Fidelity for a piece of the LINE secondary - in retrospect, probably a mistake to assume I wouldn't be invited to the party.

      I'm also curious to see what will happen w/ calls next week - I sold covered calls also (won't see quite the return you're looking at).

      My understanding is that the options are actually settled after 4 pm (by 4:30, I think). That gives market makers plenty of time to arbitrage a situation where the calls cost less than $0.63.

      I agree with your earlier comment - better know what you're doing if you are trading options at this point in the distribution cycle.

    • Ozy, the secondary offering was thin and few shares were allocated. I was able to get shares from one of the participating investment banks.

      I suspect those shares were made available based on my account activity and value. Basically they gave me the option of taking all or none of the shares they had and luckily I took them all which turned out fine.

      I am surprised I got the shares I did, frankly. Dumb luck I guess. I have invested in energy all year and done well.

      Most of the shares were in MLP's like, bwp, kmp, paa, epb, etp. But also in tankers like ksp, electric energy cnp and oilfield services bhi and of course line. These were the best investments in my portfolio this year.

      I am impressed with the action in line so far. I may get called away but 18% in a month or so is not too shabby!

    • I believe the secondary offering was made available to institutional investors only. Somebody correct me if I'm wrong - maybe if your broker wanted to do you a solid you could have been alloted some, otherwise the shares went to mutual funds, hedgies, etc.

    • with line and the market bouncing up and down I closed my options out at a 10% profit In at 2.35 out at 2.60 both trades were basicly no premium to the value of line.

      I have 10 more options in my taxable account with the dec 25 calls sold to spread it I plan to exercise ,early, and collect the div and maybe not be called away on the dec 25's

    • I'm referring to the newly created units that were sold at discount to current market price... you know, the ones that diluted the value of our existing shares

    • Actually I bought at 21.87(granted it was in the after hours market)

    • You could have on the open market on Oct 7.

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