Buy Alert: October 3, 2014
Buy Alert: October 3, 2014
Option Strategy:
Buy Conoco Phillips (COP) January 16, 2015 $80.00 calls for $1.20 or better.
Commodity Outlook: Crude Oil
Yet again, it was another absolutely horrible week for commodities. Crude sank to $88 a barrel in the Thursday morning session before rebounding slightly. What’s more, gold and silver are getting crushed in today’s trading.
While I believe gold and silver have more downside, oil is likely close to a bottom.
Why?
Not only is global demand still on the upswing, but OPEC will likely cut production at a November 27th meeting. Middle Eastern oil producing countries simply won’t stand for oil in the $80 range for very long.
As a result, now’s the perfect time to try a low risk trade in the oil patch.
Resource Company: Conoco Phillips (COP)
Maybe you remember our COP call trade from earlier this year. The international oil and gas producer hit both our upside profit targets and ultimately ran to $87 a share.
As a result, our calls ran to maximum gain of 407%.
But now, thanks to the severe summer downdraft in oil and the companies producing it, COP is trading at $75. Not only are the company’s shares a good value at this level, but $75 in an important area of technical support.
As a result, we have the opportunity for a very low risk trade in COP.
Given the solid rebound in the broad markets today, it’s likely bulls return to COP soon.
So here’s what we’ll do…
Buy the COP January 16, 2015 $80.00 calls for $1.20 or better.
The current bid/ask spread for this contract is $1.06/$1.12.
Do not pay more than $1.20 per contract!
Our official entry price for performance tracking is $1.12. Your price may be higher or lower.
Exit Strategy:
Remember, we want COP to trade higher. Our first profit target is $79. COP could achieve this target if oil simply holds on to the $90 a barrel area. But if oil bounces to $95, we could see COP jump to our second target at $81.
The risk control price for this trade is $72.50. If COP trades below that level, conservative investors should consider closing this trade to preserve capital.
Category: Commodity Trading
