Trading Energy In the Wake Of BP Hearing
Investors are trying to make heads or tails out of the energy trade after lawmakers berated and scolded BP Chief Executive Tony Hayward, Thursday, during a congressional hearing that can only be described as openly hostile.
"BP cut corner after corner to save a million dollars here and a few hours or days there," fumed Democratic lawmaker Henry Waxman.
The strong language used during much of the 7-hour Q&A renewed chatter that the industry may be facing stiff new safety regulations.
How should you trade energy in the wake of the hearing?
Instant Insights with the Fast Money traders
The tone of the hearing suggests that lawmakers are looking for blood, muses Tim Seymour, and it says to me stay far away from BP stock.
I’m always amazed at what a circus congressional hearings can be, adds Karen Finerman. I understand the ire but I don't see any valuable developments from the hearings - certainly not as an investor.
Looking at the options market, investors crushed volatility in BP, explains Pete Najarian. That suggests investors may be getting more comfortable with these events. I’m not -- but perhaps other investors are.
If you must play BP I’d look at a covered call strategy, counsels Guy Adami. That way you’re dealing with defined risk.
I’d note that Exxon is sending rigs from the gulf to other parts of the world, adds Tim Seymour. With a moratorium on deep-water drilling in the gulf I really think oil prices are going up.
I agree oil prices could climb, adds Brian Kelly, just on a decline in supply.
My estimates suggest oil trades around $85 into the back half of the year and around $90 in 2011, adds Raymond James analyst Pavel Molchanov.
I also agree oil will go higher in the wake of these events, says strategic investor Dennis Gartman, but I don't expect oil to trade much over $100 in my lifetime. There's a very large contango out there which says to me there's more than enough supply. With a very large contango, it's hard to feel broadly bullish.
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If you're looking for a trade, I'd take a look at the solar names, adds Seymour. First Solar just got a big upgrade from Credit Suisse. I think alternative energy could get a push from these events.
I like to call solar 'oil on steroids', adds Raymond James analyst Pavel Molchanov. If oil trades higher solar usually follows. But my favorite energy play right now is with the super-majors; my favorite name among them is Chevron, he says.
In the space I think the trade is long nat gas, counsels Guy Adami. I'd play it with HGT or Apache.
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Trader disclosure: On June 17, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BAC), (NOK), (SBUX); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman’s Firm owns (AAPL); Finerman owns (BP) calls; Finerman & Finerman’s Firm owns (HPQ); Finerman & Finerman’s Firm owns (IBM); Finerman owns (KFT); Finerman & Finerman’s Firm owns (RIG) calls; Finerman is short (IYR); Finerman is short (IWM); Finerman is short (MPY); Finerman is short (SPY); Pete Najarian owns (MRVL), short calls; Pete Najarian owns (HPQ), short calls; Pete Najarian owns (MRVL), short calls; Pete Najarian owns (CMC) a call spread; Pete Najarian owns (TCK), short calls; Pete Najarian owns (AMD) calls; Pete Najarian owns (LLC) a call spread; Pete Najarian owns (C) calls; Pete Najarian owns (BAC); Pete Najarian owns (BBY) a call spread; Kelly is short (GS); Kelly owns (BP) puts; Kelly owns (FCX) puts; Kelly owns (GLD); Kelly owns (GDXJ)
Funds Managed By Dennis Gartman Are Short Yen
Funds Managed By Dennis Gartman Are Long Canadian Dollar, Australian Dollar
Stutland equities is a market maker in (SPX), (VIX) & (VXX)
Stutland equities owns (SPX) & (VIX) futures and options
Stutland equities owns (VXX)
Molochanov owns (CVX)
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