Jim Cramer in an online interview gave broad indications about the sectors he feels are cooling down and the sectors with momentum.Overall, Cramer stated he felt the market was cooling down momentarily, “What I see is we have these periodic ends of momentum. There is way too much money running the country to allow this to happen for very long. I see profit taking emanating initially from the real estate investment trusts.”
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_02_13_HC_UCO.mp3
Cramer stated that he felt investors are looking toward familiar blue chips. “What are people buying? I think people are reverting to the Kellogg, Colgate, Procter & Gamble — those are quintessentially safer. Momentum money gravitates for the moment to safe.”
The companies the pundit is currently most interested in are those supplying the oil and gas industries. Specifically companies manufacturing parts for oil rigs.
“Hanover compressor (HC) and Universal Compression (UCO) have gone into a tremendous multiple compression phase. They’re growing at 25 and 30%. Wall Street doesn’t like them because they may have down quarters year after year,” Cramer said in an online interview.
Hanover Compressor Company and Universal Compression both engage in the fabrication, sale, and rental of equipment for oil and natural gas production, processing and transportation applications.
Merger:
The companies announced their merger on Monday, February 5th. The AP reported, “The stock market on Monday thought combining the two companies, both based in Houston, made them about 17 percent more valuable. Hanover’s stock rose 18 percent and Universal Compression gained 16.4 percent after the two companies said early Monday they will merge.”
Potential Trades:
All of the following option trades have 33 days until expiration. Hanover Compressor is currently trading at $22.50 and Universal Compression is currently trading at $68.60. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| Covered Call – Hanover Compressor Co. (HC) $ 22.50 (33) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HCCX | 07 MAR 22.50 | $0.50 | 2.20% | 2.30% | 2.30% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread — Universal Compression Hldgs. Inc. (UCO) $ 68.60 (33) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
% Return |
Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UCOCM | 07 MAR $65.00 | $4.70 | UCOCK | 07 MAR $55.00 | $14.10 | 6.40% | $64.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Hanover Compressor covered call trade, an in the money covered call, offers 2.2% downside protection and a potential profit of 2.3% if the stock remains unchanged or rises. The net cost of this trade, per 100 options, is $2,200.00.
The Universal Compression trade is a bull call debit spread. This trade offers 6.4% potential profit if the stock remains above $65.00. If the stock decreases below the break-even price of $64.40, the investment begins to lose money. If the stock price goes below the lower strike price of $55.00, the entire investment is lost. The net cost of this trade, per 100 options, is $940.00.
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
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[tags]Kellogg, Colgate, Procter & Gamble, AP, Houston, HC, Hanover Compressor Co., UCO, Universal Compression Hldgs. Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]