I do sleep better, Ken, when I don't hold overnight, so I'm always prepared to preserve capital with a stop loss. (They're invisible with TDAmeritrade.)
At around 12:20 PM (PST) or so oil was still smartly up per CNBC, and I couldn't resist turning on the computer. LINE seemed too low considering how well the WTI price was behaving (which didn't mean the units wouldn't go lower). Still, I bet 5K of Linn units at 11.14 with a stop at 11.05 and sold shortly before market closing at 11.25. So it's a nice restaurant tonight. And, always fun, various books from Amazon for the various grandkids. (I don't know why I switched horses from LNCO, which I'd been so lucky with this week, to LINE. My wife said that winners shouldn't whine. I don't know why not. I'm good at it.)
These days I never have confidence with day trades (or any for that matter). Also I just trade on margin, and by selling on the same day I buy, there are no margin costs. So, in effect, I'm getting huge leverage free of charge. I'll make my bets when a move up seems more likely than not, but I'll always play using a close stop of a dime or a bit less. And if there's a move north, I'll move the stop up.
I'm not playing the spread but I am gambling. Perhaps "speculating" is a better word except that anyone who's in LINE/LNCO, whether for the short or long term, is certainly speculating. So maybe I'm somewhere between gambling and speculating as opposed to purely arbitrary Vegas #$%$ table plays. I do look at oil prices, momentum, and Level II bid/ask indications, so it's a tad better than a play on the pass line. Today, for example, crude was smartly up so I bought 5k of LINE on margin at 11.30 and sold shortly after at 11.46.That's good enough for the day, so I'm turning off the computer to avoid an impulsive trade (my weakness) which would likely give back the winnings.
BB, your Linn K-1s will be all zeros (and thus ignored at tax time) if you make sure not to receive a distribution. It's not hard to time that and avoid the horror of umpteen complex state and federal tax schedules that need filling out. The instructions and laws for tax filing can be incomprehensible. But they're great for the antacid business.
ST gains can't kill you as you still keep most of the profit. Surely you're not taxed on 110% of what you make. Anyway, so far this week I've made five LNCO day trades (a record for me) with from 5k to 8K in shares. Unusually enough they each made from $.10 to $.37 in profit. The bets can be fun (when you get lucky) and, in my case, I have more than enough capital losses in LNCO when I bailed some months back to not sweat the taxes.
I'm still puzzled, though, about how wide the LINE/LNCO gap has become and how complacent so many longs seem to be about the quarter's really low oil prices. Linn's rosy projections (which I regarded as too optimistic in light of the debt/equity ratio)) were based on oil in the 60s. NGLs aren't looking too hot either. After Linn lost so much in a fully hedged 2014 Q4, I can't envision this year's Q1 as being decent. I'm doing day trading because I'm afraid to even hold either LINE or LNCO overnight. The end of April or beginning of May will produce the earnings announcement. Should be pretty interesting.
So, Richard, we'd be importing and exporting at the same time?
Also, how is the U.S. economy enhanced with higher energy prices? Keep in mind that energy stock holders want higher prices, but lower energy costs are a boon to virtually every other business as well as consumer budgets. Were there a national referendum probably 90% of the population would vote for $30 oil and $2 NG.
I'm duly impressed that you can authoritatively speak for everybody. So why don't you have me "blocked"? And what do you have against us trolls?
I saw an attractive screw driver near a pair of pliers by a table saw. If the chart can fulfill the needs of the 3/4" router bit and the 14" band saw, all signs will be bullish . . . unless Ferdinand is busy with the cows again. He does find those hammer bottoms a turn-on.
I see that you're quite intellectually skilled at responding to the point. I suppose that simple thoughts for simple minds can be a comfort. Well, I'll place you on Ignore with the other folks who find coherent relevance a challenge.
I'm baffled by your post. What's the relevance?
Also your last sentence is in error. An MLP must pay most of its "available cash" as investor distributions.Should it use large amounts of cash flow to pay down debt (or for other company needs) the available cash could be minimal.
LINE units are yielding about 11% while the 2020 bond (including the capital gain at maturity in 5 years) is around 13.5% with interest accumulating daily. Seems to me that income investors in Linn Energy who want reduced risk and more income with no K-1 hassle would favor the bonds over the units. Of course, Linn has to remain a viable company for 5 years for you not to be flushed away regardless of one's choice of units or bonds. Still, in a bankruptcy unit holders would receive nothing while bonds could pay $.30 to $.40 on the dollar, I'd guess, if all assets are sold and the cash divvied up among the creditors. (Note that the super-high rates on both units and bonds are indicative of high risk.) It's even possible that all of Linn could be bought by a larger company for shares in that corp.
Ops, I'll add that sentiment is based on technological advances, global economies, current and anticipated production, supply/demand issues, OPEC decisions, energy-analysts' prognostications, speculators' activities, and more. So sentiment is a byproduct of umpteen moving parts, any one of which is capable of affecting energy and stock prices. So that means Monday's upbeat outlook can morph into Friday's gloom or that this year's bulls can become next year's bears (or vice-versa), all for logical and/or emotional reasons. This game makes it treacherous to be confident.
You'll note that numerous posts are high on emotion but bereft of reasons. And those red and green thumbs can't be taken seriously. You can receive red thumbs simply for citing an interesting article or saying anything that hints of bearishness.
You do realize that we're still importing oil because of numerous contractual obligations. Wouldn't it be an interesting irony to be exporting what we're importing? And to whom, with a global oil glut, remains unclear.
And for all we know it could be rough going through 2017 and beyond. I suspect that energy entities will try to compensate for lower prices by increasing production, figuring that if they reduce output more than marginally, they risk floundering in the wakes of competitors. Granted that energy ups and downs are cyclical, there's no telling how long a given cycle will last as, in my view, there are too many variables to make a confident projection based on the past, as will certainly be done by a number of folks, especially those whose self-interest aligns with their predictions.
Very nice post, Somil.
For years I've been kind of baffled about why so many oil producers continue with large-scale production even when they're losing money, as so many are today. Too many contractual commitments? Too costly to shut down and start up again? Too difficult to lay off workers and then find new, qualified hands when they're need? Fear that bad timing will be even worse than continued pumping? Other stuff that I have no idea about? (Of course, painful oversupply isn't exclusive to the energy industry.) Anyway, if all the info in the WSJ article is close to the mark, I think that the risk/reward ratio isn't currently favorable for holders or buyers of LINE/LNCO. But I think there could be considerable volatility that would favor really nimble traders with strong stomachs. (That eliminates me on both counts.)