Thursday, May 8, 2008

I'm in a trade

I'm long on Valero right now. I was close to shorting crude, but instead I decided to go long on Valero. Valero is a refiner and marketer that suffers initially when crude goes up, because the crack spread (the difference in price between crude and gas) narrows and thus hurts the margins of refiners. Thus usually when crude bounces back to the moving average, it should help profits.

Unless the market is pricing in some non-public information, this should be a good trade. It's trading at 6 PE, 11 PE for next year, and is trading at approximately breakup value. I got a good price yesterday afternoon. We'll see if it hits my target in a sufficient time frame.

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