Petrohawk (HK) Soars on Oil Price Updraft
by Houghton and Atkeson 09/22/08
Options buyers have done well with Petrohawk Energy (HK) this year. In the first half of 2008, we saw repeated call buying as the stock ran from the high-teens to the low-$50 range -- a more than 200% upward run.
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HK pulled back with commodity prices and recently hit a low of about $20. But with the government bailouts going into full effect, oil prices are starting to revive.
Option investors have returned to HK and are actively buying the HK Oct 30 Calls (HKJF) today about 3,500 times. With the stock trading at $26, and given its sensitivity to rising oil prices, this is an interesting trade that could lead to quick profits.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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