OceanFreight Reports Earnings

7:45pm (EST)

Note: There was a problem with the Weekly Wrap sent out on Sunday night and I apologize if some of you received it late. We had a technical issue sending the newsletter out and some of you may have just gotten it today. The Weekly Wrap is posted Sunday nights here in the blog so if you can always check here if you don’t receive it by midnight.

OceanFreight (OCNF, $1.79, up $0.11) had another solid day before reporting earnings after the bell, adding 6%. The company reported a profit of 13 cents a share on revenues of $2.6 million and in after-hours the stock is up another 7% to $1.92.

I had mentioned in the Weekly Wrap that the stock was getting some heavy looks and on Monday morning the stock was still going for $1.52 after the open. I listed the December 2.50 calls (QZVLZ, $0.64, up $0.05) as an option trade but we were booked. They were going for 40 cents on Monday as well and are now up over 50% in just two days. They could inch up again on Wednesday if the after-hours gain holds.

The point I want to make is that both the stock and options have done well. If you had bought a 1,000 shares on Monday it would have cost you about $1,500. On Wednesday, it looks like you will be able to sell them for $2 and make 33% on you investment. With the options, you could have bought 20 contracts for $800 and sold for 70 cents (probably) on Wednesday. That’s $1,400 or a $600 profit in 48 hours.

The Baltic Dry Index (BDI) is an index for commodity shipping rates that measures dry bulk shipping rates on 40 routes across the world. I use this as a tool to get a read on the sector and when the action is starting to pick back up again. Today, the BDI closed at 2,605 which is a seven month high. We are still well off the heights of 11,000 which was hit in May 2008 but well above the low of 700 in December.

Although business is being conducted at reduced prices the renewed interest is a good sign for the shipping industry. However, we still have to protect our gains in case we run into some stumbling blocks. If you got into any of these trades, set stops accordingly, but hopefully, we can ride the gains for the rest of the week.

BTW, Cisco Systems (CSCO, $18.88, up $0.16) sneezed and made it to $19.35 before slipping…

Rick Rouse
Rick@OptionsMentoring.com

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