When you talk about natural gas and oil stocks, names like Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS.A) and Occidental Petroleum (NYSE:OXY) immediately come to mind. These are blue chips to buy and hold forever if you’re a conservative investor or if you have a part of your portfolio dedicated to energy stocks. But they’re not commonly known for the kind of quick moves I like to see in the stocks I track for options.
Click to Enlarge For those, you have to dig a bit deeper. On any given week, only a few stocks give signals strong enough to make them a candidate for profitable options trading, and they’re generally not the steady-eddy names everyone knows. My Power Options system uses multiple regression analysis and other statistical tools to unearth the few stocks that are building momentum and poised to make a quick burst—like Helmerich & Payne (NYSE:HP) this week.
Since November 2012, this stock has seen higher highs and higher lows, and it’s trading above both its 50-day moving average and its 200-day moving average—all bullish signs. My Power Options system has identified an undervalued call option for this stock that has a good chance of meeting its profit goal by March.
Recommendation: Buy HP March 65 Call options at $1.15 or lower, when the stock price is around $61.90. After entry, take profits if the stock price hits $66.40 or the option price reaches $3.20. Exit if the stock price closes below $59.70 or the option price falls to 60 cents.