Buy Alert: August 5, 2014

| August 5, 2014

Buy Alert: August 5, 2014


Option Strategy:

Buy Synergy Resources (SYRG) September 19, 2014 $12.50 calls for $1.00 or better.


Commodity Outlook: Crude Oil

No doubt about it, the price action in WTI crude is terrible right now. In spite of ongoing geopolitical concerns, the commodity has dropped $8 a barrel since mid-July.


With oil trading around $97 in today’s session, further downside is relatively limited. If the commodity falls to $95 in coming sessions, there’s a very good chance of a significant bounce.

As a result, I think the odds are in our favor if we look to a very carefully selected oil and gas producer for our next trade.

Here it is…


Resource Company: Synergy Resources(SYRG)

Something very interesting is happening with SYRG today. But before I show you what it is, let me give you a quick recap of the company.

SYRG is a small-cap oil and gas producer with operations in the Wattenberg Field of Colorado’s Denver-Julesburg basin. The company has grown production at a compound annual growth rate of 110% since 2011.

Clearly, this is a quickly growing oil and gas producer.

What’s more, 80% of their revenue mix consists of oil, which is a high margin product.

And here’s where it gets interesting…

SYRG, along with other Colorado based oil producers, jumped higher yesterday in response to anti-fracking legislation being taken off an upcoming ballot.

The news has a well-heeled investor making a big bullish bet in SYRG. In fact, someone purchased 6,000 August $12.50 calls for $0.50 in this morning’s session.

That’s a $300,000 bet SYRG will be over $12.50 by August 15th.

While an August 15th expiration is a bit risky for my tastes, we can follow in the footsteps of this big money trader with September contracts.

So here’s what we’ll do…

Buy the SYRG September 19, 2014 $12.50 calls for $1.00 or better.

The current bid/ask spread for this contract is $0.65/$0.80.

Do not pay more than $1.00 per contract!

Our official entry price for performance tracking is $0.80. Your price may be higher or lower.

Exit Strategy:

Synergy Resources

Remember, we want SYRG to trade higher. Our first profit target is the $14 resistance area. We may see additional gains for SYRG if WTI crude rebounds to the $100 a barrel area in coming weeks. In such a scenario, SYRG may jump to our second profit target at $15.

The risk control price for this trade is $10.25. If SYRG trades below that level, conservative investors should consider closing this trade to preserve capital.


Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.