Buy Alert: March 21, 2014

Buy Alert: March 21, 2014

 

Option Strategy:

Buy BP Amoco (BP) May 16, 2014 $47.00 calls for $1.15 or better.

 

Commodity Outlook: Oil

Crude is back over $100 a barrel in this morning’s trading session.  As you may know, the US is starting to apply heavier sanctions on Russia due to the country’s involvement in the Ukrainian crisis.  Given this increasingly uncertain geopolitical situation, oil bulls are back in control of the market.

Here’s another low risk play in the oil and gas industry…

 

Resource Company: BP Amoco (BP)

BP came out with interesting news yesterday.  The company bid $42 million for 24 exploration blocks in the Gulf of Mexico.  Of course, BP is the same company that caused the horrific Gulf oil spill back in 2010. 

But now that the ban on leases in the Gulf has been lifted, BP is once again sitting in the driver’s seat in this prolific oil and gas reserve.

Let’s buy the BP May 16, 2014 $47.00 calls for $1.15 or better. 

The current bid/ask spread for this contract is $0.97/$1.00. 

Pay no more than $1.15 per contract!

Our official entry price for performance tracking is $1.00.  Your price may be higher or lower.

Exit Strategy:

Remember, we want BP to trade higher.  Our first profit target is the $48.50 technical resistance area.  We could see additional gains for BP if the Russian sanction situation heats up any further.  In such a scenario, BP may jump to test 52-week highs at our second profit target of $50.00.

The risk control price is $46.20.  This is directly below the gap down low that occurred in yesterday’s trading session.  If BP falls below that level, conservative investors should consider closing this trade to conserve capital.

 

Category: Commodity Trading