Buy Alert: November 7, 2014

| November 7, 2014

Buy Alert: November 7, 2014

 

Option Strategy:

Buy Ultra Petroleum (UPL) January 16, 2015 $25.00 calls for $1.35 or better.

 

Commodity Outlook: Natural Gas

Holy smokes…

The natural gas market is on fire! As you know, the commodity has exploded to $4.45 mmBtu this morning thanks to a sudden onset of cold weather.

According to the NOAA, below normal temperatures are set to consume the Eastern and Central US for the next two weeks! If cold weather keeps up, the US could very well be in a natural gas supply shortage situation like we were last winter.

This is very good news for natural gas producers!

Here’s a company that will benefit greatly from an extended run of high prices…

 

Resource Company: Ultra Petroleum (UPL)

UPL is a Houston, Texas based natural gas producer. The company has operations in the Marcellus shale of Pennsylvania and Green River Basin of Wyoming.

UPL recently reported Q3 earnings of $0.53 a share on $288 million in revenue.

Both metrics came in above analysts’ estimates.

With good earnings in the rear view mirror and natural gas prices on the rise, now’s the time to jump on UPL calls.

So here’s what we’ll do…

Buy the UPL January 16, 2015 $25.00 calls for $1.35 or better.

The current bid/ask spread for this contract is $1.15/$1.25.

Do not pay more than $1.35 per contract!

Our official entry price for performance tracking is $1.25. Your price may be higher or lower.

Exit Strategy:

Ultra Petroleum

Remember, we want UPL to trade higher. Our first profit target is $26.75, which is the late August swing high. If natural gas sustains the current rally, we’ll likely see UPL achieve this target in coming weeks.

But if natural gas extends the current rally, we may see UPL jump to our second target at $29.00.

The risk control price for this trade is $21.75. If UPL trades below that level, conservative investors should consider closing this trade to preserve capital.

Until next time,

Justin Bennett

***Editor’s Note*** UNG hit our first profit target at $23.50 in this morning’s trading session. Be sure to take some profits off the table in your UNG January 16, 2015 $21 calls!

Category: Commodity Trading