The LEAPS Trader
105 W. Monument Street
Baltimore, MD 21201
Monday, November 20, 2006
Email – #348
** Merger Monday – Good News and Bad News
Unfortunately, when the commercial real estate market corrects, we will not have our Equity Office Properties (NYSE: EOP) horse in the race.
As a continued testament to the craziness of the private equity markets today, EOP is in the process of being taken over – at a whopping 10% premium to its share price… It’s not much of a premium, but it will take the company private.
That means our January 2009 $30 PUT options (OLH-MF) will expire worthless since we were short. We had two years left on this position, more than enough time for a nice correction in the commercial sector. Right now, there is no choice but to sell the options in the market today. There should still be a small bid on the options – take advantage of it by selling your puts today.
In other news, Freeport McMoran is trying to take over copper giant Phelps Dodge.
The premium in this deal is about 30%, in a declining copper market.
That bodes well for our Goldcorp (NYSE: GG) position, as the deal continues to value resource companies at good valuations – remember Goldcorp is also a substantial copper producer.
And it continues the trend of consolidation in the industry. So far in the past 30 days, two deals have been announced – Kinross and Bema, and now Phelps and Freeport. This follows on the heels of the Goldcorp-Glamis deal that just closed.
Goldcorp is also an attractive acquisition target for one of the major producers because of its high-reserve, low-cost profile.
Chesapeake Energy (NYSE: CHK) is also on the move.
The price of natural gas, combined with strong earnings, has put some life back into the position. We have already cashed in one side of the spread, and we have a full year left to go on the call side.
Good investing,
Karim
Current Portfolio:
Company / Symbol: Equity Office Properties (NYSE: EOP)
Option / Symbol: Jan. 09 $30 put (OLH MF)
Date Purchased: 6/22/06
Current Price: $0.25
Comment: Sell.
Company / Symbol: Microsoft (Nasdaq: MSFT)
Option / Symbol: Jan. 08 $30 call (WMF AF)
Date Purchased: 8/8/05
Current Price: $2.65
Comment: Hold.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $12.41
Comment: Hold.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Jan. 08 $35 call (WZY AG)
Date Purchased: 4/25/06
Current Price: $3.70
Comment: Hold.
Company / Symbol: AMD Micro Devices (NYSE: AMD)
Option / Symbol: January 2009 $35 call (VVV AG)
Date Purchased: 6/21/06
Current Price: $2.50
Comment: Hold.
Bull & Bear Spreads
Company / Symbol: CBOE Volatility Index (WCB: ^VIX)
Option / Symbol: Feb. 07 $15.00 call (VIX BC)
Date Purchased: 5/3/06
Current Price: $0.90
Comment: Hold
Company / Symbol: CBOE Volatility Index (WCB: ^VIX)
Option / Symbol: Feb. 07 $17.50 call (VIX BW)
Date Purchased: 6/14/06
Current Price: $0.55
Comment: Hold. Sold call against Feb. 07 $15 position.
Company / Symbol: GoldCorp (NYSE: GG)
Option / Symbol: Jan. 09 $30 call (OPJ AF)
Date Purchased: 6/9/06
Current Price: $6.10
Comment: Hold.
Company / Symbol: GoldCorp (NYSE: GG)
Option / Symbol: Jan. 09 $40 call (OPJ AH)
Date Purchased: 6/9/06
Current Price: $4.10
Comment: Hold. Sold call against January 09 $30 position.
Company / Symbol: Teva Pharmaceutical (Nasdaq: TEVA)
Option / Symbol: Jan. 08 $40 call (WTX AH)
Date Purchased: 5/23/06
Current Price: $1.35
Comment: Hold.
Company / Symbol: Teva Pharmaceutical (Nasdaq: TEVA)
Option / Symbol: Jan. 08 $45 call (WTX AI)
Date Purchased: 5/23/06
Current Price: $0.65
Comment: Hold. Sold call against January 08 $40 position.
Company / Symbol: Energy Select Sector SPDR (AMEX: XLE)
Option / Symbol: Jan. 07 $39 put (XLE MM)
Date Purchased: 3/1/05
Current Price: $0.10
Comment: Hold.
Company / Symbol: Energy Select Sector SPDR (AMEX: XLE)
Option / Symbol: Sell Jan. 07 $37 put (XLE MK)
Date Sold: 3/30/05
Current Price: $0.10
Comment: Hold. Sold put against January 07 $39 position.
