Trade Summary: December 7, 2015

| December 7, 2015

December 7, 2015

 

Trade Rationale

It’s December already!  Yes, it came as a surprise to me as well.  I’m really not sure where most of this year went.  Nevertheless, 2016 is almost upon us.  So, it’s time to look to next year for our next trade theme.

Actually, this should be plenty straightforward.  I’m going to pick two stocks in sectors which I think will improve in 2016 (and buy calls on them).  And, we’ll buy a put on a company which I think could be in a struggling sector to start the New Year.

Not much more to say about this theme, so let’s get right to it!

The first company we’ll buy calls in is Cameco (CCJ).  2016 may very well be the year we get carbon rules in place to combat global warming.  That’s a good thing for nuclear power, which is about as green as it gets (in terms of emissions).  CCJ is the largest uranium producer in the world and is super cheap right now.

Next, let’s purchase calls in The Blackstone Group (BX).  While banks are the most obvious beneficiaries of higher interest rates, it can also help asset management companies.  Higher rates mean more opportunities in the fixed income space for higher yielding securities.  Big asset managers like Blackstone could see a nice bump to their returns in 2016.

Finally, we’re going to buy puts on PG&E (PCG).  While higher rates will help financial companies, they’ll have the opposite impact on utilities.  Investors will switch to the safety of bonds if they can get higher yields from them.  Large utilities like PCG could start losing investors to fixed income products as soon as rates begin going up.

 

Trade Details

#1) Buy Cameco (CCJ) March 18th 12 Calls up to $1.00

For this trade, we’re looking CCJ to climb.  Our first profit point for conservative traders is at $13.  For aggressive traders, you can hold up to $14.50.  For risk control, the conservative exit level is $10.50.  $9 is the final exit level for aggressive traders.

Cameco

#2) The Blackstone Group (BX) March 18th 31 Calls up to $1.90

With this trade, we’re also looking for a move higher.  Our first exit point for conservative traders is at $33.50.  For aggressive traders, you can hold to $36.  For risk control, the conservative exit level is $29.  And, $27 is the final exit level for aggressive traders.

Blackstone Group

#3) Buy PG&E (PCG) March 18th 50 Puts up to $1.50

Finally, we’re looking for a lower move in PCG.  Our first profit-taking exit point for conservative traders is at $48.50.  For aggressive traders, you can hold to $47.  For risk control, the conservative exit level is $55.  $57.50 is the final exit point for aggressive traders.

PG&E

 

Category: AOA Trade Summary

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