Strategiest Max Breier is Bullish on Oil & Gas ETFs

Energy prices are on the rise after Sunni militant fighters started attacking and capturing several cities in Iraq. Oil prices could exceed $150 per barrel if Iraqi production is completely lost. BMO Capital Markets Equity Derivatives Strategist Max Breier was interviewed on Bloomberg Television’s “Market Makers,” where he discussed his options play for the SPDR S&P Oil & Gas Explore & Prod. ETF (NYSEARCA:XOP). Let’s take a look at some of the highlights.

The program started with Mr. Breier explaining why bond investors have reacted so decisively to the inflation data, while equity investors were less alarmed.

“Bonds are reaching what most people think is a ceiling, or a floor, as far as yields go. So, there is not much more room to the downside for yields. There is a natural convexity in the bond market that is not present in equities, just based on where yields are at this point.”

On the opposite, the market is telling us that equities have more room to rise still: volatility is very low in most asset classes, same as the VIX, so “there is a bit of complacency, if you will, but there is no major risk factors to shake thinks up.”

Construction Infrastructure Unemployment Rate Labor Force Participation

As the interview continued, Mr. Breier went over the SPDR S&P Oil & Gas Explore & Prod. (XOP), a fund that seeks to replicate as closely as possible the total return performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The ETF includes E&P companies, mainly mid-cap (and even smaller capitalization) firms. “With everything that is going on, both in Iraq, and growth coming in better than expected out of China (…) there is a lot of reasons to be bullish on crude, and therefore, bullish on the E&P –he explained. So, the trade that we like calls out to September. SPDR S&P Oil & Gas Explore & Prod. is trading around 81, so the 87-92 call spread for about $1 gives you a great payout and a great way to get long the upside in the E&P names.”

Within the energy segment, one stock has been particularly active lately. Williams Companies Inc. (NYSE:WMB)’s stock rose 2.3% today, after surging about 19% yesterday, following the announcement of a proposed merger with Access Midstream Partners LP (NYSE:ACMP). “We are seeing continued call-buying. We saw call-buying before the proposed merger was announced. And this is a somewhat low volume stock; so a 20% move in Williams is actually a very large move for this type of stock. And it’s really a play on the energy infrastructure; as we all know there is a huge supply shift coming online in the U.S., both in terms of natural gas and crude. What’s lacking is the infrastructure to move that energy around,” Mr. Breier said.

Disclosure: Javier Hasse holds no position in any equities, bonds or ETFs mentioned

 

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!