Buy Alert: March 9, 2015
Buy Alert: March 9, 2015
Option Strategy:
Buy OAS Petroleum (OAS) May 15, 2015 $15.00 calls for $1.40 or better.
Commodity Outlook: Oil
Oil is starting off the week with gains. The commodity traded higher by $0.39 today to close at $50 a barrel.
Of course, crude has been stuck in a rather indecisive sideways trading pattern since early February as investors try to decipher incoming supply/demand data.
While I expect more indecisive action for this commodity in coming weeks, there’s a great buying opportunity in a deeply oversold oil producer right now.
Let’s get to it…
Resource Company: Oasis Petroleum (OAS)
As loyal readers know, we’ve traded OAS before. In late December 2014, we collected 275% gains on a perfectly timed call trade in the Bakken oil producer.
I believe another profit opportunity is at hand.
Let me explain…
This morning investors learned Whiting Petroleum (WLL) is offering itself up for sale. Investors rushed into the Bakken’s largest producer in hopes of catching a looming buyout. WLL closed higher by 10.8% in today’s session.
Now listen closely…
Who knows how soon WLL can get a deal done, and what price.
But when they do finalize it, the news will likely bring bulls roaring back into smaller Bakken competitors like OAS.
But that’s not all the only thing OAS has going for it…
OAS insiders have been gobbling up shares on the open market the past few days. Michael McShane, a director at the company, purchased 50,000 shares of OAS on the open market on March 4th. With the transaction taking place at $12.80, it’s a $640,000 investment.
But there’s more…
SPO Advisory, a 10% owner in OAS, purchased 8,000,000 shares on March 4th. According to SEC filings, the deal was also done at $12.80, which means it’s a $102.4 million insider purchase!
Clearly, some well-heeled investors think OAS is undervalued and due to rally.
So here’s what we’ll do…
Buy the OAS May 15, 2015 $15.00 calls for $1.40 or better.
The current bid/ask spread for this contract is $1.10/$1.30.
Do not pay more than $1.40!
Our official entry price for performance tracking is $1.30. Your price may be higher or lower.
Exit Strategy:
Remember, we want OAS to trade higher. Our first profit target is $18 while our second target is at $22.
The risk control price for this trade is $11.50. If OAS trades below that level, conservative investors should consider closing this trade to preserve capital.
Category: Commodity Trading
