Options Trader: Thursday Morning Ideas

by: Philip Davis

Release the T. Boone!

That’s right, whenever they need a Super-Mega Oil Pump they roll out the big guns and no one shoots their mouth off better than that impartial predictor of peak oil - T. Boone Pickens. Mr. T has 59,800 Google pages devoted to his bi-monthly statements that oil will go to $100 - yet EVERY SINGLE TIME he says it, CNBC (Criminal Narrators Boosting Crude) treats it like it’s a story!

Who better to give viewers a "fair and balanced" perspective on energy investing than a man who made $1.6Bn last year on oil and gas plays? Logic would dictate that he probably didn’t make that much money by tying up just a few million dollars in the energy sector so T. Boone is probably the world’s single largest Roach in the Energy Motel, yet the wheel him out on CNBC (Criminal Narrators Boosting Crude) whenever they have problems making a technical, like yesterday’s failure to break away from $64.

Boone Pickens

This is a man who, last April, said $5 a gallon gas would be a good thing for America. What a patriot! A patriot, who, by the way gave $5M in "soft money" to launch "Swift Boat Veterans for Truth" in the last election. Could it be a coincidence that he’s back just when Suncor Energy (NYSE:SU), his largest single holding failed to break over $77 after a Deutsche Bank AG (NYSE:DB) upgrade?

Yesterday SU gapped over the descending 200 dma at $75.32 and holding that level is critical to establishing a better chart pattern, so keep that in mind as they run his clip 20 or 30 times today. SU MUST have oil over $55 to be competitive with other energy producers, $40 oil would cost that company half it’s market cap at least.

As Options Sage pointed out in comments this morning, what can we really expect from "Financial News" when our regular news is such a joke?

Don’t despair, though, the government is cracking down. TXU Corp. (TXU) "may" be fined $210M for manipulating Texas’s electricity market in 2005. Additionally the company is charged with overcharging customers by 4%, adding $80M to their $2.4Bn in profits for 2006.


"The $210 million payment recommendation was based on Potomac’s analysis, which found that TXU — the biggest utility in the state by generating plants — submitted bids in excess of its real costs at periods of high demand and also withheld electricity from the market. Both had the effect of raising prices, according to the analysis."

Yeah, that $210M will really teach them a lesson - let this be a warning to other energy companies who gain $15Bn in market cap and make billions in profits by manipulating prices AND overcharging consumer - IF you are caught, we MIGHT hit you with a 1% penalty! What? Criminal charges??? LOL - don’t be silly, this is America - we don’t prosecute people for stealing money (unless it’s small amounts, under a billion), especially not campaign contributors!

Someone must have instituted a 1% penalty on the bears at the Nikkei, which traded down 150 points into their lunch break and then resumed trading up 100 points to finish the day flat. This had nothing to do with the Hang Seng, which rose all morning and finished the day up 267 points as a dollar recovery cheered up the exporters. Europe is up half a point this morning with transports perking up as Brent crude traded down, but T. Boone aims to put a stop to that nonsense this morning with his pre-market appearance.

Our own markets held their levels yesterday and if we can get the Dow (I give up on the transports) positive, we are very likely to get some capitulation from the bears today. Let’s keep in mind that tomorrow is the end of the quarter, so much of the action we’re seeing may be window dressing, but that doesn’t mean we shouldn’t make money on it, right? We picked up more Google (NASDAQ:GOOG) June $490s yesterday at $12.85, and I still like that play.

We also sold the Apple (NASDAQ:AAPL) May $100 puts for $7.80 and covered with the May $95 puts at $5, which we can remove on good momentum. We still have our uncovered
Accredited Home Lenders Holding Co (LEND) shares at $10 (basis $8.50) in our $10K Portfolio, and wouldn’t it be fun if we can sell the $7.50s for the third time at $4 or better?

Hopefully the U.S. markets will be kind to us today otherwise we’ll start feeling silly for holding onto all those calls! The GDP was a healthy enough, 2.5%, so what the heck were we worried about?

Phil\'s US Markets

US Markets

We need to see the Dow get over 12,369 and hold it to call today a victory. Any downward move on the SOX is a sign to line up some downside coverage but let’s hope we can start looking for our break out levels tomorrow rather than our break downs.

Of course, take our remaining mattress plays off the table. If the markets fail we want to reset at yesterday’s starting levels although we could leave some on as we’re certainly going to want them over the weekend no matter what the markets do over the next two sessions. The WSJ has a very disturbing chart on the "worsening" subprime delinquencies that makes me wonder what everyone is so excited about this morning.

Oil will do its best to hold $64 today and we have plenty of bets in both directions so we’ll see if the natural gas inventories can give us some momentum one way or the other. Britain and Iran are arguing over whether the UK will apologize for going into Iranian water,s and Blair is waving satellite photos that show they weren’t - but Iran doesn’t believe in satellites, so what kind of proof is that? If all this silly posturing meant anything, gold would be over $680 and it’s not!

Oil and Dollar

The dollar is down 2.5% since 2/12 and oil is up 10% while gold is effectively dead flat. What if we weren’t at the brink of war with Iran? Heaven forbid peace breaks out and a lot of people are going to lose a LOT of money, so let’s all bow our heads and pray that our leaders keep us firmly on the path to war, lest our profits suffer!

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No picks today, we should be pleased with our oil covers this morning thanks to T. Boone, but let’s just keep on our toes as all this relentless pumping just smells like a repeat of yesterday when roaches scrambled out of energy stocks as oil climbed all the way to $65.

Happy Trading has an excellent set of charts on his web site, giving us a good view of the technicals and our man Tom2oc makes a good case for the sky not quite falling yet. I don’t argue with the chartists but let’s just keep in mind that our pal Cramer just told us last week that funds purposely game the technicals to lay a "bull trap" for retail investors. This being the day before the end of quarter I will warn you that nothing is what it seems and the real face of the market will be shown on Tuesday. Be it a bull or be it a bear I cannot say - my magic 8-ball is on the fritz!