EXM Too Good to Pass

Add Small Call Position Now

By Bryan Bottarelli
Thursday, January 17, 2008 1:48 PM EST
Thu, 17 Jan 2008 18:48:00 GMT

PLAY: Buy the EXM February 30 Calls (EXM BF) at or under $3.00, good for the day. Place a protective stop limit at $0.90.

Dear Bottarelli Research Member,

As you know, the Dry Bulk Shippers are a sector that I watch very closely. And without exaggeration, 2008 has been an absolute bloodbath for this group. The most notable stock in this sector is DryShips (DRYS – NASDAQ) and the stock has only had one up-day in all of 2008. Brutal selling pressure. Now, as you can expect, the option premiums are through the roof on a volatile stock like DRYS. And that’s why I think it’s worth a short to take a very small upside call position in Excel Maritime Carriers (EXM – NYSE).

EXM

Similar to DRYS, EXM has been a train wreck this year — falling from $80 in November 2007 to current levels under $30. This down-move has really clobbered the value of EXM’s options string, especially the premiums that are baked into the prices. But as you can see from the chart, EXM is showing signs of life for the first time this year, and this presents us with an opportunity to take advantage of a quick price pop using the February call options that have been decimated in price. So here’s what I’d like to do.

If you’re willing to make a speculative bet on an EXM pop, then I’d like to add February calls now. If you decide to jump, be sure that you play a reduced number of contracts. If you decide to sit this one out, that’s fine too. After all, your APA and RIG profits certainly made for a successful day — and our GILD February 50 Calls (GDQ BJ) are coming back to us as well. But you pay me to call them like I see them, and in that spirit, I feel the risk/reward on EXM February calls are worth a shot. If you agree, then here’s the play:

PLAY: Buy the EXM February 30 Calls (EXM BF) at or under $3.00, good for the day. Place a protective stop limit at $0.90.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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