Trade is up $15,000 & I'm going to sell the Nov 105 call for $5. Max profit @ $105 is $30k with a BE lowered to $59. I'll wait until earnings to roll or sell more.
Nov 20/22 bull call spread traded 34,480 contracts this morning. You can do that trade one better by trading the Nov 19/21 call spread & selling the Nov 11 put to finance it for $0.05 credit, which will cover your trading costs.
Sell a long term put / buy a call, also known as a risk reversal or combo, at 65/85 (15% down & 10% above the current stock price.) Basically a substitute for stock. Sell 1x call at the bought strike (basically making a calendar) & if you're aggressive, 1x call OTM (naked, about another 10% out.) In six months with aggressive trading, you might get your breakeven to zero. Exercise your bought call to get the dividend or cap gain as you see fit.
"...much of the last leg of downside has simply been a result of financial flows, sentiment and macro fears. Physical markets are strengthening, with more improvement ahead, which historically has transmitted into prices on a delayed basis."
Middle East oil is a couple of grades lower in quality than WTI that is produced by frackers. The U.S. imports 33% of its oil, so with a better U.S. product I'd expect that number to go down. The Saudis are trying to maintain market share because they made a mistake in losing it the last time oil went down. This time they're making another mistake because their market share is going to go down anyway because of U.S. production. OPEC countries are clamoring for production cuts, which must happen because of the budgets in these countries which they use to maintain order and/or placate their population.
The market has really thrown the baby out with the bath water with EMES. At the current price & dividend, it is pricing in no dividend growth (and by association, no growth in the company.) At just 2% projected growth the company is worth $111.
D/P + g = r
D = dividend, P = stock price, g = dividend growth rate, r = cost of capital
$4.68 / $72.5 + g = 6.22%
6.45% + g = 6.22%
g = .23%
P = D / (r - g)
P = $4.68 / (6.22% - 2%)
P = $4.68 / 4.22%
P = $110.90
Sand is a pretty new industry so investors don't know how it will react to lower oil. They should be able to stay the course down to $80 for half a year. However, in the interim, it makes sense for frackers to increase variable costs (sand) that increase output (sometimes dramatically) before they drill new wells.
Dropping oil prices will increase sand use in order to optimize existing wells instead of digging new.
Drillers are expected to use nearly 95 billion pounds of “frac sand” this year. That’s up 30 percent from last year, according to energy specialists at PacWest Consulting Partners, who expect the market to keep growing as drillers increasingly accept that using more sand increases the oil and gas production from each well.
Dropping oil prices could dampen fracking investment, and therefore sand mining, if they continue for too long, but analysts aren’t betting on it.
“As (oil and gas companies) seek to optimize well results, they are using significantly more frac sand per well,” said a recent Morgan Stanley Research report. “We believe the industry now sits on the verge of a prolonged frac sand supply shortage.”
As an example, I own HCN. I bought it when it went down in the early 1990's. The adjusted price when I bought it was around $3.50 & is about $66.50 now. Comparatively, the S&P 500 (HCN is a component) went from an adjusted price of around $400 to $1,900. In a growing, strategic sector you're going to get both dividend growth & stock price appreciation. If you hang on for the long-term you'll get rewarded.
Here are the prices various OPEC countries need to break even. They will achieve this or risk more chaos in their own country, which no government can afford. If they cut costs instead of the budget & there is an "Arab Fall" due to service cuts, oil prices will still go up. http://crudeoilpeak.info/wp-content/uploads/2012/10/Fiscal_break_even_oil_prices_Sep2013_APICORP.jpg
I just don't like that one single shareholder can exert so much influence for his own short-term gain & not for the long-term prospects of the company.
Here are the prices various OPEC countries need to break even. They will achieve this or risk more chaos in their own country, which no government can afford. If cut costs instead of the budget & there is an Arab Fall, oil prices will still go up. http://crudeoilpeak.info/wp-content/uploads/2012/10/Fiscal_break_even_oil_prices_Sep2013_APICORP.jpg
Reuters) - The political party that launched environmentalist Marina Silva's unsuccessful presidential bid threw its support behind pro-business candidate Aecio Neves on Wednesday for Brazil's Oct. 26 runoff vote against leftist President Dilma Rousseff.