Add DO Calls
Playing a Consolidation
PLAY: Buy the DO April 85 Calls (O:DO 10D85.00) at or under $5.70 (or best price) good for the day. Place a protective stop limit at $3.20 and a pre-determined sniper sell at $8.50.
Dear Bottarelli Research Member,
With a current trading ledger that’s biased to the downside, it’s a wise tactical decision to add one new upside call play into the mix. On that note, I’d like to introduce a new upside play on oil service leader Diamond Offshore Drilling (DO – NYSE).
Last week, DO announced three (3) new drilling contracts with Brazilian oil giant Petrobras worth up to $1.36 billion. The contracts for DO’s floating and drilling rigs includes a three-year deal for the ultra-deepwater semisubmersible called Ocean Valor worth up to $493 million in revenue. It also includes a three-year deal for the deepwater semisubmersible Ocean Baroness worth up to $307 million in revenue. And finally, it includes a five-year deal for the deepwater drill-ship Ocean Clipper worth up to $557 million in revenue.
Not only that, but DO’s special $2.00 dividend that they paid back in early February makes their trailing annual dividend yield at 9.10%, which is absolutely phenomenal in today’s market. With a strong valuation and a series of new contracts, DO looks ready to break to the upside. Let’s use the recent consolidation to establish a new position now!
PLAY: Buy the DO April 85 Calls (O:DO 10D85.00) at or under $5.70 (or best price) good for the day. Place a protective stop limit at $3.20 and a pre-determined sniper sell at $8.50.
At the same time, I’m also keeping a sharp eye on CF Industries (CF – NYSE). Last Friday, Thomas Weisel initiated coverage with a $110 price target, saying that demand for ammonia is now on an upswing. Their 2010 and 2011 EPS estimates were set at $6.43 and $7.41 respectively, which is very strong. I’m also hearing rumors that Goldman Sachs is actively adding CF shares. Therefore, let’s watch this one for a possible call play on this recent dip.
Until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.
Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.
CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.