Lenny Dykstra
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 - Cramer on PVR - Stock Picks) 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.
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