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Linn Energy, LLC Message Board

  • ruby.thedyke ruby.thedyke Oct 22, 2013 4:10 PM Flag

    Too far, too fast?

    After hanging around the low $26's for awhile, since October 10 this has gone parabolic. Why? Do we know anything more now than then? Yeah, another S-4 amendment was filed, but that was today, and appeared to have limited impact on the price.

    I'm concerned this (relative) euphoria could come crashing to earth if the Berry deal runs into a snag, not that it dies, but the time limits get so stretched that they have to renegotiate the deal in some fashion. The other problem might be disappointing Q3 metrics, coverage (however that's defined) mired below 90% for example. Securities have a tendency to crash badly when high hopes are dashed or even tempered.

    Unfortunately, there doesn't appear to be a cost effective way to protect oneself. I have substantial profits in the units and calls, but the only puts I found that are half way reasonable are the Jan 14 $25's at around $1 - 1.10. The price is okay, but not for January, you really need to go farther out if you want to give yourself a chance to catch the brutal downside that would result from the Berry deal collapsing completely. I think this uncertainty can drag into the new year easily, but the April puts don't entice me. To get a buck per contract you have to go to $21-22, and that's too low, I could see it bottoming out there, but no home run on the put if that happens. And you'd need a four banger or so to offset the damage.

    So, while I'm glad to see green, I have to confess, I would have preferred a more gradual advance, and, of course, some actual reason beyond the trading to get optimistic.

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