Tuesday, June 9, 2009

EOG Bull Call Spread

Eog Resources (EOG) is a natural gas company that has been making a series of higher highs and higher lows in recent months even as nat gas itself has languished. EOG has been wrestling with its 200 day ema as of late and I think it's safe to say the trend is higher as long as it holds the 70 area. With nat gas showing signs of basing lately I think the play here is to buy a July 75/80 call spread for $2 or better.

Max loss on this trade is the initial debit of $2 you pay and the max gain is $3 if EOG is above 80 at July expy. Of course you can always take profits before then as well.

Breakeven on this trade occurs if EOG is at 77 on July expy.

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