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Feb 23 2011 / Stocks - XOM, TLM, MRK, TD, BNS, NUE

It's All About The Price Of Oil

Opinion Article


Anxiety In Stocks Over The Price Of Oil

The equity market is anxious about the price of oil. Should oil move over $100.00 a barrel many investors will worry that any economic rebound in the US is in jeopardy. The TV will be filled with the naysayers and the return of the bears. This will increase the amount of selling. Personally I have no idea where the price of oil is headed. I do know that no one else has any idea either. As I sell naked puts I am pleased to see the VIX jumping in value which is beginning to push premiums up on put options. I had many positions expire on Friday and I look forward to putting many of them back to work particularly if stock market shares pull back further.

Overall my personal opinion is that the bull trend is not over, but I do feel that my cautious approach of which I wrote in early January, remains the best strategy. The Middle East has always been a problem area for the world and until the day that the world does not run on oil, it will always play havoc with stocks and bonds. However increases in volatility through investor anxiety can assist to beat the market since every increase means better prices for options which I sell, and increases my investing profits.

Two years ago I purchased a Toyota Prius hybrid vehicle, but I can attest to the fact that it still uses gasoline and by the time it enters the car cemetery, it actually leaves a bigger carbon footprint than my SUV or even a Hummer! Alternative energy fuels are a long way off and they only ever seem to come to the attention of the world when oil prices skyrocket and gasoline prices rise dramatically. Then all the government officials go back to their “talk” about alternative fuels.

In my opinion, the alternative fuel is more likely much better gasoline mileage out of the engines of tomorrow. Personally I would love to own a vehicle that gets 100 miles to a gallon. The auto companies all claimed that they could not increase mileage out of engines until Ronald Regan legislated it. Then in many cases they doubled gas mileage. I believe there are lots of alternatives to today engine consumptions and I just wish the government would push the manufacturers to get busy producing much better engines with a lot less consumption.

Back to share prices which continue to be under pressure. I remain firmly committed to my selling put options strategy and I placed a number of trades today including selling puts on EXXON, TALISMAN on the Toronto Stock Exchange (TX), MERCK, TD BANK, also on the Toronto Stock Exchange, BANK OF NOVA SCOTIA, again on the Toronto Stock Exchange and NUCOR. I have lots more puts to sell should the pullback in share prices intensify. .


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