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Suncor Energy: How to Trade the Oversold Stock


Investors became understandably jittery after the company announced a "challenged" outlook for returns.

Suncor Energy (NYSE:SU) is a Calgary-based Canadian energy company focused on the production of synthetic crude oil from oil sands. Suncor's operations are primarily based in North America, although the company inherited assets in Libya and Syria through its merger with Petro-Canada in 2009.

In early February, Suncor announced that it would hold off on building a multi-billion dollar oil sands processing plant in Alberta, partially in response to weakening returns due to cheap light crude flowing from the North Dakota Bakken Territory. Citing a "challenged" outlook for returns on the project, officials have tabled the project indefinitely. The market's response was negative, with shares selling off nearly 14% before finding a bottom at $29.83. Since then, movement has been sideways with shares successfully retesting the $30 level several times.

While investors became understandably jittery in light of this news, the stock became somewhat oversold. Certain selling could be attributed to hedge funds rotating out of the sector. Daniel Bubis's Tetrem Capital Management and Ken Griffin's Citadel LLC hold currently hold the number one and number two institutional stakes in the company.

My Trade: Buying the SU June 32 calls for $.55
Risk: $55 per 1 lot
Reward: Unlimited
Breakeven: $32.55

Greeks of this Trade:
Delta: Long
Gamma: Long
Vega: Long
Theta: Short
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No positions in stocks mentioned.
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