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Non-Tech : Invest / LTD
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To: Peter V who wrote (8234)4/16/1999 9:06:00 PM
From: Thean  Read Replies (1) of 14427
 
Pete, if you compare the option premium of the drillers versus others, they have been pathetic. Well, that may change soon if oil can sustain its upward pressure above $17. $17 was a resistence for the past 2 months so today was a breakout. Monday will either confirm or deny it. RIG's resistence is at $31. But if OSX breaks into the higher high gear, $31 will be taken out with ease. I would not sell call here but would let it go higher first, at lease give it a chance to see if it can break above $31. Selling calls is great for a sideway market, not a bull market - which the drillers are shaping up to be short term if oil keeps going till $19. But if RIG still cannot break above $31 after another week of trying and things look tired by then, selling May 30 call would be a good defensive play by next Friday.

Oil is currently surging becaues people are building in the expectation that OPEC compliance will be 85% or better in April. In the unlikely scenario of oil moving higher than $19-$20 after the OPEC cheat data becomes known, I would expect OPEC and non-OPEC to cheat bigger once again and a temporary fear would return. That is the nature of the oil play and one just have to see the future possibility one step ahead. Some call the oil price swing the supply-demand balancing act. I call the oil price sentiment a perpetual greed-fear act.
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