As crude oil prices leaped toward the $66/ barrel mark, today's excuse is worries about the on-going turmoil in Nigeria, possible labor strikes in Norway, and supply issues in Iran. Have you ever noticed when it comes to oil, it痴 always something.
In the fall, the excuse for higher energy prices were fears of a colder than normal winter in the northeast. This winter was mild and we still have high energy prices. The next excuse will be the summer driving season, and after that will be the fears over the upcoming hurricane season. Not withstanding a geopolitical event, the cycle will return to its same old mantra.
Gasoline prices rose again to put the price of a gallon of unleaded up to $1.86. When you add the federal, state and local taxes on a gallon of gas, you find consumers are paying out the nose.
At this point, I wouldn't mind seeing every American worker go on a nationwide strike, refuse to purchase a drop of gasoline for a day or two, and create a supply glut that would drive gas prices down. Since the odds of this happening are extremely remote, we will be content with owning our energy stocks.
Here is a list of our energy plays, and the entry prices on our purchases:
Chesapeake (CHK- cost $32.55/ bought Sep 05): Sold May 32.5 calls- CHKEZ
Valero (VLO- cost $56.61/ bought Feb 06): Sold May 62.5 calls- VLOEZ
Conoco (COP- cost $59.73/ bought Feb 06):
Sunoco (SUN- cost $80.36/ bought Feb 06): Sold May 85 call- SUNEQ
Exxon (XOM- cost $59.73/ bought Feb 06):
Marathon (MRO- cost $58.87/ bought Oct 05):
The reason we sold calls on selected positions because of either disappointing price action (CHK & SUN), or the stocks are approaching the upper-end of their trading range (SUN & VLO).
XOM and COP still look cheap, and we believe MRO is a takeover candidate, so we did not sell call options on these positions.
