Best Stock on the Market

Call Spread on HAL on 10/1/2012

One of the largest oilfield services companies in the world, Halliburton serves the upstream oil and gas industry in 80 countries with a complete range of services, from the location of hydrocarbons to the production of oil and gas. It operates in two segments: Drilling and Evaluation and Completion and Production. Services include providing production optimization, drilling evaluation, fluid services, and oilfield drilling software and consulting. It combines tried-and-true well drilling and optimization techniques with high-tech analysis and modeling software and services. Halliburton works in established oilfields from the North Sea to the Middle East as well as in newer sites in Southeast Asia and Africa.


Stockwinners is bullish on this name for the following reasons:

  1. The situation in Middle East is escalading and will cause volatility on price of oil. Oil companies are poised to rally in such situations.
  2. HAL has underperformed the market and is cheap compared to the overall market.
  3. This trade has a longer time horizon compared to some of our other option trades, in order to increase the chance of finishing in the money. We are paying little premium to capture that time horizon.

Trade: Buy 1 Jan 36/38 call spread for less than $.55

  • Buy 1 Jan 36 Call for $1.25
  • Sell 1 Jan 38 Call for $ .67

Breakeven & Profit/Loss Analysis

  • Breakeven at $36.55 by Jan 2013
  • Profit up to $1.45 between $36.55 and $38, Max Profit $1.45 above $ 38
  • Lose up to $.55 Between $36.45 and $36 , Max Loss $.55 below $36

The payoff table is presented below:

Trade

  • Buy 1 January $36.00 Call at $1.25
  • Sell 1 January $38.00 Call at $0.70
  • For a net debit of $0.55

Profit/Loss Analysis

  • Breakeven at $36.55
  • Maximum profit is $145.00 at strike of $38.00
  • Maximum loss is ($55.00) at strike of $36.00

Closing Summary

  • Sold 1 January $36.00 Call at $0.50
  • Bought 1 January $38.00 Call at $0.00

Position closed on 1/15/2013 at price of $0.50 with a -9.09% loss in 106 days.

Updates

1/15/2013 12:01:28 PM

We are closing the HAL position today and will net nice return. If you elect to stay in the trade, please adjust your stop losses.

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