Two Non-Events

ATPG Earnings and Fed Prove Surprisingly Quiet

By Bryan Bottarelli
Wednesday, May 10, 2006 5:06 PM EST
Wed, 10 May 2006 22:06:00 GMT

Dear Bottarelli Research Member,

The markets spent the morning gearing up for an extremely volatile afternoon — one in which the latest Fed decision (and subsequent Fed language) looked to throw a lot of volatility into the markets.

Furthermore, a mid-afternoon earnings call from ATP Oil & Gas (ATPG – NASDAQ) appeared to make the day even more eventful. But as it turned out, each pieces of news proved to be relative non-factors.

I listened to the whole ATPG conference call, and what really struck me was the improvement in their cash position. As of March 31st 2006, ATP had $138.1 million in cash and cash equivalents on hand compared to $65.6 million on December 31st 2005. That’s more than double their cash in a three-month timeframe!

As I continued to listen to each speaker, from the CEO to the CFO, it sounded to me like this quarter’s earnings were nothing compared to what’s on tap for the rest of the year. Both their language and tone of voice seemed to indicate that the best news is yet to come for ATPG, and for that, I remain biased to the upside. Hold your ATPG June 45 Calls (HKU FI).

ATPG

For most of our other upside plays, we’re sitting within striking distance of our entry prices. The two most concerning plays right now are my speculative trade on China Mobil (CHL – NYSE) and my one remaining downside play on eBay (EBAY – NASDAQ).

In terms of eBay, I think you can understand why I’m short. Similar to Intel and Dell, eBay is just the latest tech stock to encounter trouble re-establishing its glory days. I’d still expect to see a move under $30.00 a share prior to June expiration. Maintain your eBay June 32.5 Puts (XBA RZ).

EBAY

In terms of CHL, the speculative nature of this stock has caused it to jump around, but don’t lose sight of the fact that they’re the dominant mobile carrier in China. In fact, I may double down if the June 30 Calls (CHL FF) remain under $1.00, but for now, let’s see how the open goes tomorrow. Maintain your CHL June 30 calls (CHL FF) with your $0.80 stop.

CHL

Today’s best performer was Lockheed Martin (LMT – NYSE), as they won yet another huge contract last evening. The terms of the deal are that LMT will get paid $120 million over five years to provide a call-center for the Homeland Security Department. As you can see by the chart, LMT looks poised to make a run back up to, and past, its recent high water mark at $78.00. Hold your LMT June 70 Calls (LMT FN).

LMT

Starting tomorrow, we’ll hopefully start to see some nice moves on all these plays. But remember, we played all these contracts into June and July, which means we have time on our side. As long as the longstanding trends hold, we’ll be in good shape.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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