Wednesday, February 24, 2010

RIG, betting on the black gold...

RIG is another name that showed up on my filter list from a few weeks back. I have since been watching the stock and looking for the right time to enter. When it first popped up on my watch list RIG was trading close to $90 per share, today it is trading $81.31. My ideal entry price was set between $80-$82 as this is marks the bottom of the range that RIG has been stuck in since October of 2009, see chart below:

Since initially finding the stock there has been a few major pieces of news that have been released. On Feb 16th, 2010 RIG announced that its board had approved a stock buyback in the amount of $3.2 billion and also would now have a regular dividend in the amount of $3.11 annually or about 4%. The sell that occurred on this day is indicated by the large volume bar of almost 15 million shares as many investors were hoping for a $4 dividend, Greedy bastards. But nonetheless there is speculation that this is just the base dividend and that it will be increased in rather short order. This news alongside the fact that it is currently trading with a p/e of less 8 is just a perfect alignment of the stars in my opinion for a trade to the long side.Why? Because I am also bullish oil. 

I have not decided exactly how I am going to make a play on this name yet. But I do know that I want to be long. Buying the stock outright is kind of out of the question as I would really only be able to buy 100 shares, but I am not completely ruling this out.  Before I initiate a position in this name I kind of want to see how the lower end of this channel holds up. Because if it breaks then the next level is another 10 points away near $72.

I will update when anything new happens.


  1. Okay so I jumped in with a partial position. I bought 2 Aug '10 $80 calls @ 7.05. I am setting a tight stop at $78.75. This about a $1 below its low from this morning of $79.80.

  2. RIG is still selling off and before my stop is hit I am going to sell 2 $75 calls against the position as a hedge for the short term as it looks like it could trade down to $72 in rather quick fashion.

    I am ignoring my stop but have protection in place now. I will look to lift the short calls if RIG regains its 200 day MA or hits my target of $72 in the short term.

  3. I have not liked the price action since I entered the trade. Today I had a glimmer of hope when the stock gapped up to $81.60 on the open only to trade lower. As I re-balance my portfolio to fit in the limits I have set I am cutting this position for now with a small $12 loss. I am still very interested in the name put I would like to see it consolidate at some price level or if its going lower before it goes higher I want to see whats going to happen.