Why I like the Trade:
1 - It is currently trading at about 10 x forward earnings with estimates for 2009 at $0.65 a share.
2 - Again this is another one that can benefit from a rise in the baltic dry index. Like DRYS they have locked a large percentage of their fleet into contracts through 2010, but there is still a percentage that stands to gain with a rise in daily shipping rates.
3 - Even if earnings remain flat this stock would still be valued at $6.5 with a multiple of 10. So I would be more than happy to see this thing trade sidways for the next 6 months.
What do the probabilities look like:
What am I seeing on the chart?
It looks like EGLE has developed a range between $4.50 and $6.50 which has remained intact since July of this year. It will be interesting to watch to see how this plays out.
Today I decided to buy back my short puts in EGLE for $0.65. I am still bullish on the industry. But I wanted to reduce my risk exposure and I think that DRYS will outperform this name.
ReplyDeleteBooked $186 profit.