Transcontinental Pipelines - My First Options Trade in Months

I have followed Transcontinental Pipelines (TCLP), a pipeline trust, for a very long time now.

Under normal market conditions it was a very stable stock (as it is in a widows-and-orphans industry), but during the last six months the stock has been effected by increased volatility as the general stock market became more unpredictable.

Below is an approximately six-month chart. As the candles show, there have been numerous days when the stock has risen (or fallen) by greater than $1.

click to enlarge


TCLP reports earnings this (Friday) morning, and I'm speculating that the stable numbers will reassure antsy investors. Obviously this trade is more lottery-ticket than science, but I was willing to throw down a little money and take a chance.

I was able to pick up at-the-money $25 calls for $.30 per contract this afternoon. If earnings please investors, a $1 or $2 pop will pay off nicely.

(As an aside, I have followed TCLP for a long time because of its very high dividend - the shares currently yield about 11%. The 5 year average dividend payment is only 6.6% [according to Yahoo Finance], which might point to share appreciation in the future. I think that TCLP is a great conservative long-term investment regardless of the outcome of my options trade on Friday.)

Disclosure: I own TCLP.

Comments

[User 66059:]

Hey Stephen, if you've really followed TCLP for a long time, you may want to take note that it's name is TC Pipeline Partners, and the TC is short for TransCanada, the company that owns a large % of its common units and its general partner. Heads up, dude.

Feb 20 08:32 AM

[Stephen Fra...:]

I apologize for the error. I'm still getting used to the new ticker - I remember still remember it as TCLPZ.

But you are right, that's an error that shouldn't have gone to print.

Earnings are now out, fyi.

Feb 20 08:51 AM

[Nathaniel C:]

i hope you did not commit to much capital to this trade. Very risky. You never know how the market will react to earnings. As a rule I never speculate on earnings with options. You will either lose 95% or double your money.

Feb 20 05:03 PM