Bullish Option Ideas in Energy and Financials
Brian McMorris submits:
I am selling UNG puts (Oct $18 – UNEVR) for $6.5 Friday morning (September 18, 2009). While I don’t like UNG longer term because I am concerned about the premium in the stock price (over NAV) coming out with a ruling from the CFTC, still it is for now the only pure play on nat gas prices. And I see those prices recovering to at least $5 just on the idea of an economic recovery and even before the excess inventory runs down and new production is shown to be behind the demand curve.
Another, more conservative Nat Gas play is PennWest (PWE), a major Canadian energy producer based in Calgary with more than 50% of its production in gas. Friday, I sold the December puts in PWE $15 for $1.60 (PWEXC). This gives me some upside opportunity from the $14.40 price and downside protection to $13.40, which has been the recent base level for PWE. PWE, which I have owned since 2002, was above $30 for two years up until July 2008, and as high as the low $40s earlier. A return to the $30 level will occur with a firming of Nat Gas prices around $8 / mmcf.
