בס״ד

This Energy Stock Outswam the Pack, And Now It’s Floating Face-Down in the South Platte River; And Winners, Too – 111% & 22% (AM,EVRI,BBY)

Posted on December 17, 2020

“A man who is happily married – whose wife loves and dotes on him, whose children are cheerful and help out – leads a charmed life, inhabiting an existential Garden of Eden.

A man who is not happily married, however, and who’s ever in conflict with his wife and children … he becomes a philosopher.”

– Hugh L. O’Haynew

Under the cover of humor, we now offer this deadly serious piece of intelligence –

Our sources deep inside the DNI (on the good side, of course) inform us that tomorrow, Friday, December 18th, 2020, the lid could blow.  A truly national and world-historic occurrence.

It could be disinformation, or it could be true.  We can’t say.

There are indications that on the last day of Chanuka we will see the President make a statement either declaring himself the winner of the election or something approximating that.

Whether de facto or de jure, or both, we can’t say, either.

Only that there could be fyrewerks, and they could come soon.  Of course, with all eight candles burning, the chance of pyrotechnics is manifestly greater.

– Developing –

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And Now to Business…

We’ve got two trades closing tomorrow that are well in-the-money, so we’re reporting on them now.

The first was our EVRI initiative of June 3rd, the details of which can be found here.

It was a covered CALL, and as of tomorrow our shares will most certainly be called.

We’ve got 200 EVRI shares at an average cost of $4.09 and the CALL strike is $5.00.

That means we take home $1000 on $818 spent.

That’s 22.2%.

And it beats slipping on an icy sidewalk.

Next up was our BBY play that we issued a fix on here.

To sum, the fix worked, and we leave the trade with $0.30 net on $0.27 spent.

That’s 111%.

And now to this week’s action.

Antero Midstream Corp. (NYSE:AM) owns and operates pipelines and also provides services to the same.

They have no P/E, but they do pay a 14.96% dividend – as cash-flow crazy utility-types are wont to do.

Earnings per share for the last year were down 343% and insiders dumped over 50% of their holdings during the last six months – a hefty $161 million, if anyone’s counting.

Here’s a look at the daily chart for the last year –

Technically, there’s what to worry about.

  1. First, RSI shaved a slice off the 80 marker last week (in green),
  2. While MACD began to roll over.  Both are bearish indications.
  3. The stock’s principal trendline was touched on the same day a sixteen month high was registered at $8.59 (in red).  From there, she’s backed off some seven percent.  But we believe there’s more.
  4. With all the salient moving averages now bunched between roughly $5.50 and $6.50, we’re expecting considerable play in that range until the MAs unfurl.

And we expect that to occur over the next few months.

For comparison sake, this is how AM stacks up against XLE, one of the largest energy sector ETFs going –

Oil and gas have a tailwind at present, and the longer term outlook, in our view, is also relatively bullish.  But no stock travels in a straight line higher forever.

We’re looking for some near term movement on AM, and we’re playing it like this –

A Jew and His Gold recommends you set the AM March synthetic 7.50 short for a $0.20 credit (0.80/1.00), and the AM June synthetic 7.50 long for a $0.70 debit (1.75/1.05).  Total debit on the trade is $0.50.

Rationale: the trade is predicated on a two-way move for AM shares, first lower then higher.

The synthetic short provides the winnings during the winter decline (buy the 7.50 PUT; sell the 7.50 CALL); the synthetic long on the bounce higher through spring (buy the 7.50 CALL; sell the 7.50 PUT).

Because the trade is calendar based, it’s impossible to determine maximum gains and losses.

The worst possible outcome would be a near-term bankruptcy for the company (before the March expiry).  We’d make off like bandits on the short sale, but the time value on the short June PUT could put us in a loss position.

Another potential trade, for those interested, would be a long-term “poor man’s covered call”.

That is, buy the January 21st (2022) 5.00 CALL for $3.40 and sell the January 2022 10.00 CALL for $0.70.  Should AM trade through the $10 level, you would take home $5.00 on $2.70 spent.  That’s a very nice 85% in just over a year.

Many happy Maccabean returns!

Matt McAbby

(Only one day remaining to jump on the Chanuka discount!

Click HERE for more info.)

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