Dykstra: An Energy Options Play That Pays Off
Lenny Dykstra
08/28/07 - 11:12 AM EDT
With prices high and demand holding steady, now is the right time to invest in energy. With that in mind,
Penn Virginia Resource Partners (PVR Quote) deserves our attention.
This company has the right mix to make money in the years to come. Until alternative energy becomes cheaper and more efficient, there will be consistent demand for coal, and 71% of Penn Virginia's income comes from managing coal properties. The remainder comes from the gathering and processing of natural gas; if natural gas takes off as a cleaner alternative to oil, look for that part of the company to prosper.
Penn Virginia provides great shareholder value in all market conditions, with a yield of 6.2%. This solid yield plays in perfectly with the deep-in-the-money strategy. It also has good financials.
With that in mind, I will place a limit order to buy 10 contracts of the February $25 (PVRBE) calls for $4.10 or better. At its close yesterday of $28.60, we will pay a mere $4,100 to control 1,000 shares for seven months, instead of shelling out $28,600 to own the stock outright.
Some background on our deep-in-the-money strategy: We look for options that trade with very little premium
and then set good-till-canceled sell orders at a dollar above our option purchase price. In selecting stocks, we look for companies that can lock in our gain on one quick move upward. This approach makes money through consistency and the cumulative effect of collecting one $1,000 gain after another.
Game of Life
Often in life, we find ourselves at the profit end of a situation, unsure of how we got there, and we attribute this success to luck. We're grateful for how we got there, and we move on. To rely on luck, however, is a recipe for disaster.
For this reason, as human beings, we work hard to achieve success, instead of relying on luck to get us through. But still, it raises the question: Is there really such a thing as luck, or is it just coincidence?
For two Chinese miner brothers, it seems to be a combination of the two. They were trapped underground about 30 yards away from the entrance to an illegal coal mine. Meng Xianchen and Meng Xianyou were in the black dust for more than 130 hours.
Early on Friday, relatives and friends went to the location to burn ceremonial money for the men to use in the afterlife. They also left ashes of burned canned goods, bread and cakes, assuming that their loved ones had perished.
Hours later, the brothers surfaced from the collapsed mine after digging with a pick for nearly six days. They had no food and little water, which forced them to drink their own urine to survive. The brothers had minimal kidney damage but otherwise seemed healthy, according to health officials.
Rescue efforts were halted after it was determined that the Meng brothers would not survive and that the rescue would put rescue workers at too high of a risk. For miners in the Shandong province, luck didn't seem to hit them.
After a coal mine flooded trapped 181 miners, they were all presumed dead. About $6.6 million had been donated for the missing miners and their families. After 10 days, the mines were still not even closed to drained, and there is still no word on the trapped miners.
So what affords one person luck and not the other? Does it even exist at all? There are no concrete answers to this question, and that only makes the whole idea even more ambiguous.
Who is to say that one miner worked harder than the other, or one miner is more deserving of luck than the other? So maybe luck really is pure coincidence. Either way, this paradoxical situation exemplifies the realities of the many disappointments in life.
The Players Club understands the unfairness of life and realizes that there are often no answers to the many questions we ask. By guaranteeing recurring cash flow to professional athletes, we strive to take luck out of the equation in at least one aspect of life: finances.
We recognize how diligently professional athletes work to achieve their goals, and thereby ensure that they realize their fortunes longer than the life of their careers. Don't wait for the lucky hand; just play the hand you're dealt.
Always remember:
Life is a journey; enjoy the ride!
