Consider Call Options on Noble Energy, Inc (NBL: NYSE)

Noble Energy, Inc (NBL: NYSE) is currently trading at $36.79 after falling 2.28%. The stock has a 52-week trading range of $29.13 on the low end and $58.02 on the high end. At present prices, the company’s market capitalization is $15.63 billion. The earnings per share are -0.07, the dividend is 0.72 and the yield is 2.16%. In terms of future projections for the stock, the general consensus among analyst is that the stock will fetch a price of $45.39 as its 1-year estimate. On a scale of 1 – 5, with 1.0 being a strong buy and 5.0 being a sell, the consensus opinion is that Noble Energy, Inc (NBL) is a buy. In fact, the stock is currently highly undervalued, as are most energy stocks right now. The low price target is $36 and the high price target is $60.

While some analysts consider it a hold, I’m going to get off the fence and say that call options should be placed for the week. The strength of the stock include its strong financial position with debt/liquidity measures. On the downside, the stock has not fared very well of late with the pressures on commodity prices and declining net income and ROE. As an investment, the stock may not do well in the medium-term, but as a short-term binary option trade the stock is on the up and up. In late October, Cowen & Co gave the stock an outperform rating with a price/target of $52. Since the company has massive interests in Israeli natural gas, we can expect approval of the framework in weeks. Even if the share price rises by $2 for the Israeli approval that is significant enough to generate a profit with call options in binary trading.

Index: Consider Put Options on S&P 500 Index

The reason I’m going short on the S&P 500 index has less to do with the actual performance of companies in the index as it does with the recent performance of the US economy. Bond yields have gained and dollar strength is on the up and up. Non-farm payrolls numbers are substantially higher than forecast figures and this means that the Fed is more confident than ever before about raising interest rates at the December 15/16 FOMC meeting. During October, 271,000 jobs were added and the consensus forecast was 185,000. Unemployment has dropped by to 5% from 5.1%; further evidence of a strongly recovering economy. You may be wondering how a bullish economy and the prospect of a rate hike impacts on the S&P 500 index? When interest rates rise, equities performance declines. And since all the data has just been released there is bound to be further bearish sentiment at the start of the trading week. We have seen sharp gains in bond yields, and bank stocks are getting a boost ahead of a potential windfall in interest-related earnings. We are seeing a strong USD decreasing the appeal of dollar-denominated commodities. Energy and mining stocks are trending lower. I am of the opinion that the US economy is tightening in a big way – it’s evident all around. A rate hike is coming. When consumer credit is more expensive, it becomes more difficult for equities markets to perform strongly.