Who thinks BP is a good play right now?

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Playing on BP bonds may not be a bad idea because they can always be sold if things go north or south on BP and depending on which way interest rates go (which will have to be up).

You know the day they get a cap on this oil, the stock is going to rally, if only for a week.

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I think you did the right thing here. Hmm, come to think of it, I should do the same as well. I'd have to sell some positions to do so, but those are really good terms.

As for the Obama speech, as we can see from today's trading action, it did nothing more than add pressure to the stock itself. Of course, the worsening spill and damage figures that are being updated and published out there did most of the damage. As of this writing, the stock easily broke through the $30 "resistance" like it didn't even exist in the first place.

While I'm here, I should also add that I think it is politically understandable that Obama would lash out so uncharacteristically against this incident. Most people don't dabble in junk trading like you and I. Instead, a lot of American families and even entire industries are going to be ruined by this oil spill.

As if the oil industry don't already have a poor public image, now things have gotten downright hostile. I've even been criticized for being an unsavory profiteer elsewhere on the internet, which doesn't make any logical sense to me. Nevertheless, the emotional outcry is entirely understandable.

So, I guess I just wanted to take the time to say to any readers who may be a little upset by this thread that, I'm sorry if you are among the victims of this disaster or if you take offense here. If I could wave a magic wand and prevent any of this from happening, I would gladly do so. That being said, I am still going to do what I think is best to move myself forward financially.

[Slug]

Very well-said. I completely concur. Now excuse me while I reap my 10%

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You know the day they get a cap on this oil, the stock is going to rally, if only for a week.

Like I said, if you feel that strongly about it, put some money on it. Let me know the buy-in price, date, and % portfolio. Otherwise, it's just talk....

[JBinKC]

The dividend cut is the sign the stock likely has hit bottom but I think the subsequent rally will be comparatively anemic and will take much longer to develop than the deepwater drilling sector where the negative impacts will be felt for less time.

I think you are going to have a more immediate lasting recovery from the indirect casualties of this spill who has no liability exposure and who is off nearly the same percentages as BP.

I.E. DO NE or ATW would be the more logical purchase candidates.

[maat55]

I really regret not jumping on Ford when it was at 2 dollars a share, but BP may be a different monster. I want to believe that it is a strong and lasting company, but its burden is heavy.

[cptacek]

I think if they can stave off being taken over by the government, they will come out of it. That risk is a new risk that people, I don't think, are calculating into stock prices/bond prices accurately. Did anyone think GM bonds were as risky as they turned out to be (i.e., as lenders, they should have been the first people to get their money in bankruptcy, but with the government takeover they didn't get their money)

[maddog21]

BP is a tough call for a number of reasons. 1. the hole is not plugged and it could get a lot worse. 2. There is always the threat of a bankruptcy filing to avoid the liability. 3. Congress is going to try very hard to use this to pass energy legislation which could hurt the entire energy industry.

On the other hand, BP's valuation is is totally out of whack because of the bad press. This means that if they do make some major head way on resolving the issue in the gulf the stock will get a big boost.

Personally I stay away from these types of plays because there are too many what ifs. I prefer to analyze the situation and figure what companies will actually make money from this disaster.

[KTP]

Personally I stay away from these types of plays because there are too many what ifs. I prefer to analyze the situation and figure what companies will actually make money from this disaster.

Hmmm...I wonder which company makes oil absorbant material like that being used in the gulf...they should post record sales next quarter...

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Hmmm...I wonder which company makes oil absorbant material like that being used in the gulf...they should post record sales next quarter...

Clean Harbors (CLH) is a classic example of an oil dispersant company that is benefiting from cleaning up the oil spill. From what I've read, the oil spill will account for an additional 50% of revenue for them, and currently, their entire inventory of dispersant is already sold to BP.

Unfortunately, as you can see, the stock has already shot up 20% since then, because while it's a good idea, many others have already thought of it and jumped in earlier.



So, now, the risk to this stock is being potentially over-valued. After all, if their business this year is maxed out, and if you believe that the stock price already reflects that, then what is the upside to buying the stock now?

[Slug]

The question with CLH is whether you buy 2011 $70 puts. Once the BP media frenzy ends, so too will the CLH love affair and the short-term momentum traders will exit.

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Haha, fascinating. Spoken like a true options trader, and something that I also need to be able to shift my mind into.

However, I still see CLH as more of a bullish story than anything. Even when the speculation frenzy subsides, there will still be a fundamental need for the dispersant to combat the oil spill. The technical trend line reflects a bullish momentum as well. Puts would be risky....

Certainly, one can still profit from the technical volatility alone. Even fundamentally, there could be a point somewhere where the EPA could finally put their foot down and say, "Ok, enough is enough. This stuff is toxic, and we won't allow any more to be used."

Hmm. Either way, it's an interesting thought. How much are 2011 puts anyway? I imagine they can't be that cheap....

[Slug]

Very thin trading in those right now. The 65's and the 70's are both last traded at 6.80. Given the bid/ask spread, I put the price on the 70's somewhere around 9 so $900. I personally have no idea how this is going to go over the next 5 months so I wouldn't touch it. I still feel good about the BP bonds though. Their price has recovered a bit too.

[Broken Arrow]

Interesting. I like the new Symbology by the way. Maybe that sounds a little crazy, but I guess it's also because I am a newbie and have never gotten used to the old system.

Anyways, assuming $9, what's the break even point then? $60.89? If so, it also means that CLH would have to fall by more than 10% by the end of the year before you're in the money....

Hmmmmmmm.... I don't know about that.

See, the problem right now isn't so much that their business is hurting from lack of demand. Rather, demand is so great that they don't have the supplies to keep up. So, while their upside potential may be limited at this point, I think for 10% to happen in the near future would still require a substantial downside to materialize that's apart from speculation frenzy and supply shortage.... Hmm. So maybe the current pricing is fair market value at this point.

Anyways, I think the BP bonds are going to be just fine. True that it's not without its risks, but then, we've also had a lot of distressed financials from this recession as well. And so long as it was of some quality, they're still alive and kicking, while much of the fear over financials seems to have subsided at this point.

[jeffmem]

On the first look BP looks like a great buy, however the impact from this catastrophy is going to bankrupt them unless governments bail them out. BP hit a volcanic vent that is spewing oil and volcanic gases as well as benezine, methane, and other VOCs, and quite frankly you cannot cap a volcano, or something this is spewing out at a rate of between 30,000 to 100,000psi. Now, this information is just what I have been reading and watching online, but if you think about it, the environmetal costs to clean this up, if it can be cleaned up will be enormous and much more than one company can pay for.

For me, I won't be investing in BP, I honestly do not think they are going to be able to weather this storm unless a solution is found to container the entire site quickly before all of this mess gets into the gulf stream. Though with the amount disperents they are using I would venture to say that this catastrohy is about to get much worse from hurricans bringing all that chemical mess onto the shores in the form of severe acid rain.