Piggybacking Oil via PVX

Add March PVX Calls

By Bryan Bottarelli
Wednesday, November 15, 2006 11:36 AM EST
Wed, 15 Nov 2006 16:36:00 GMT

Dear Bottarelli Research Member,

I’d like to piggy-back the oil news by adding to our position in Provident Energy Trust (PVX).If you’re a new Charter Member, or you have yet to enter into this play, PVX is an open-ended energy income trust that engages in the acquisition, exploitation, development, and production of crude oil and natural gas. With operations in Alberta, Saskatchewan, California, and Wyoming, the Calgary-based operation has proven plus probable oil and gas reserves of 134 million barrels of oil equivalent.

PVX

What got my attention was that PVX was one of the Canadian trusts that got absolutely hammered by a proposed tax structure change in Canada, which prompted a knee-jerk sell-off across the board. The chart above shows this extreme gap-down. But when you dig deeper, you’ll realize that any proposed tax changes will not take effect until 2011, which in my view means the harsh selling pressure was unwarranted. To capitalize on the over-extended selling pressure, I recommended buying longer-dates calls, specifically the PVX March 10 Calls (PVX CB). We originally paid $1.15 for these calls, but now you can get them for the bargain price of $0.80 to $0.90 per contract. At these levels, I’m recommending that you add to the position — or if you have yet to enter — add contracts to your ledger now. Today’s great upside tick bodes well for the near term, and I feel playing PVX calls into March will eventually pay off.

PLAY: Buy the PVX March 10 Calls (PVX CB) at or under $0.95, good for the day. Maintain your $0.40 stop.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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