3 replies to this topic

[Jhoe]

out of the money july calls on each name. coal prices are surging....seems like the same dynamic that led us to the surge in crude last spring (no, still not buying libya and its <1% of global production as a "supply disruption", OPEC and the saudis are the only "supply disruption" that exists, and its a heckuva lot more than 1% of global production). Either way, these names appear under-priced relative to the move in coal prices we're seeing, especially those with exposure to the import/export market where this pricing can be turned into profit. Domestically thats CNX, as far as BTU, its definitely tied to the china story, which is shaky at best right now, so thats the smaller of the 2 positions for that risk alone. No stock positions, upside call spec only. Not my favs, but ANR, WLT and ACI also worth a look. Probably like ACI the least of the pack. I'm avoiding/shorting any highly debt levered junk stocks right now, esp as this global liquidity cycle in theory continues to wind down. So ACI, or a name like patriot coal, PCX, I would avoid. g/l to all EDIT to add: the chart of WLT sums up the trade....opened at the lows today, moving from lower left to upper right, the way stocks often do before/during a run much higher. Or, check out CNX yesterday intraday. Same price action before the late day swoon. Still closed well off the day's low though.

Edited by Jhoe, 23 June 2011 - 09:20 AM.

[Jhoe]

just another point on energy, the USO is already above the average volume of the last 30 days just over an hour into trading. And surprisingly enough, a lot of it is green, not red. Could be some sort of ST bottom in crude, or a sign we're close. Just want to reiterate, one reason I focus on energy trades right now is because I'm naturally hedged with a big euro short. If the euro moves against me, and it has surely done that in the last few months at times, it only makes sense to have long exposure to a sector that will be highly correlated, and have exposure to the other side of my euro short accordingly. One may say "well -1 + 1 = 0." Yes, thats the point My beta comes into play via the trading vehicle, not the direction itself. The euro short is a simple currency pair trade, no derivatives, little margin as possible. The other side is usually derivatives, so its quite possible, and frequently the case, where I can have better days as the euro rises than when it falls despite the size of the position overall. In any case, somethings goin on in the materials space today, particularly energy. The way coal prices have surged as I mentioned before, and some of the recent volumes in energy stocks and now the USO today, could be that elusive chance to get long energy that has evaded traders for a couple months now...at least the profitable traders that is

[dasein]

HO, CL look to me like they have further to go. now with this reserves release news with credit going to the SAUdis wanting to BK Iran, we should have a little more to go, also seasonals have bottoms both mid june mid july so we could have a lower low by then. another reason I would not be sure the move down in coal is done - looks to me CNX should get to 42 and could get to 36.

Edited by dasein, 23 June 2011 - 11:11 AM.

[Jhoe]

HO, CL look to me like they have further to go. now with this reserves release news with credit going to the SAUdis wanting to BK Iran, we should have a little more to go, also seasonals have bottoms both mid june mid july so we could have a lower low by then. another reason I would not be sure the move down in coal is done - looks to me CNX should get to 42 and could get to 36.

I actually agree on all points. I should have clarified, this is definitely a ST trade, as in anywhere from a few hours to a week or two. Thats why I'm not shy about going right after front month call options from the long side. The charts of the coal stocks I mentioned are NOT necessarily bullish or bearish at this time, IMO. Is it a perfect time-ticked bottom? Maybe not, if it was I already missed it a couple days ago in BTU and CNX. I'm making this trade based more on price action in recent days, the surge in coal prices, and the fact that oil hit $89 and change today, a key fib level, and has traded pretty well since that point. So I'm not saying the bottom is in on these stocks, or that the bottoms not in; rather the upside, especially if crude starts to chug higher from here (which I'm definitely not saying it will--its just another catalyst) outweighs the downside, especially in my assessment of the options prices and where the upside potentially is, even given relatively small moves in the moves of the underlying stock. I know, when I talk about debt and stuff like that its really not much of a factor in ST trades, so bear with me. I only got into that issue to differentiate stocks in the sector, as I've noticed some laggards across the entire market that can be singled out by their debt levels compared to peers. And thats to be expected with the way the corporate paper especially HY/jnk market has struggled as liquidity starts to cycle down--both seasonally and with QE ending. But long story short I like the sector, but definitely agree there might be a better time to buy in the next 30 days for the more conservative trader/investor.

EDIT to add: same sector, materials, but slightly different approach--also looking at AA and VALE here. Probably favor AA since earnings are 2 weeks away, and as I will be using options the implied VOL will be a tailwind to my position, if/when I put it on.

Edited by Jhoe, 23 June 2011 - 12:30 PM.