MEMP/Stock - I don't see much oil, mostly gas. I do like nat gas long-term and they seem pretty cheap at $1.14Bn with $103M in profits last Q. Of course, they had $114M in losses the Q before that so I'd want to know a LOT more about them before trusting them with my money. I don't like the fact that they are buying back $150M worth of stock instead of paying down their debts but, on the other hand, they have a big, fat dividend ($2.20, 14.9%) and I guess they wouldn't be buying back the stock if they couldn't afford to pay the dividend. With the stock at $13.10, you can sell July $12.50 puts for $2.10, which is a net $10.40 entry, about 25% off. That's a lot more than the dividend and your worst case is you own them at $10.40 on a big move down - so that's how I'd play it for the initial entry.
Worked out nicely Burr. 1,187.50 is still being a good short spot but too scary into tomorrow.
DBA is, of course, the first of our Secret Santa inflation hedges. It's always good to hedge food and DBA is back where we love them at $25.48. Options only go out to 2016 but you can sell the 2016 $24 puts for 0.90 and buy the $24/27 bull call spread for $1.50 so net 0.60 on the $3 spread has 400% upside potential and it's $1.48 in the money to start.
Let's say your family spends $1,000 a month on groceries, $12,000 a year. If you want to hedge against a 20% jump in food (and/or clothing) prices (which would pop DBA to $30), that's $2,400 so 8 contracts at $480 would do it, just 4% of your grocery bill and the only way you lose is if the cost of Ag staples drops during the year - and that would save you the $480!
