Buy Alert: July 7, 2015

Buy Alert: July 7, 2015

 

Option Strategy:

Buy Transocean $RIG August 21, 2015 $16.00 calls for $1.00 or better.

 

Commodity Outlook: Crude Oil

No doubt about it, crude bears came out of hibernation the past few days.  West Texas Intermediate (WTI) plummeted to $50.50 a barrel in this morning’s session as traders factored in headlines from Greece and China.

Thanks to the abrupt downturn in oil, our puts in the SPDR Oil & Gas Exploration & Production $XOP jumped to a 109% gain early in today’s session.

What’s more, $XOP has now hit both our downside profit targets at $46 and $43.  As a result, everyone should have taken some nice profits off the table in this trade!

But now I’m noticing something interesting…

Oil names are rebounding hard in the afternoon session.  I’m seeing green across the board in energy as short sellers cover and new value buyers step into the market.

With most energy stocks trading near the lows set earlier this year, now’s a great time to bet on an energy bounce.

Here’s how we’ll do it…

 

Resource Trade: Transocean $RIG

Today we’re diving into the offshore oil industry.  As you may know, Transocean is a global leader in the deep water drilling industry.

Shares of the offshore explorer are up sharply off the lows set earlier today.

There’s a very good chance we see additional upside in $RIG in coming weeks.

So here’s what we’ll do…

Buy the $RIG August 21, 2015 $16.00 calls for $1.00 or better.

The current bid/ask spread for this contract is $0.79/$0.89.

Do not pay more than $1.00!

Our official entry price for performance tracking is $0.89.  Your price may be higher or lower.

Exit Strategy:

Remember, we want $RIG to trade higher.  Our first profit target is $19.00 while our second target is at $20.00.

Our risk control line is at $13.90.  If $RIG trades below that level, conservative investors should consider closing this trade to preserve capital.

 

Category: Commodity Trading