Buy Alert: June 16, 2014

Marcus Haber | June 16, 2014

Buy Alert: June 16, 2014

Trade Details

Buy United Parcel Service (UPS) July $100 Puts for $1.20 or better

Why?

The situation in Iraq has unfolded faster than anyone could have foreseen. The conflict has caused crude oil prices to jump to over $106 per barrel. That could result in some pain at the pump for consumers.

But it’s not just families and individuals who will feel the pinch from higher gasoline prices. Companies also could take a hit. In particular, a company like UPS has quite a bit of exposure to gas prices. Of course, its massive fleet of delivery vehicles consumes large quantities of fuel.

Given the history of the US in Iraq, the government could be slow to move on this particular conflict as the many options are weighed. In other words, I don’t see the situation resolving anytime soon. We could be dealing with higher crude oil prices for longer than expected.

Let’s take a bearish position on UPS given the scenario.