Search This Blog

Friday, February 25, 2011

Range Resources, an Update

Range Resources (symbol RRC) is a stock I have written about previously. I chose it as the stock for November when it was about $39 per share and I reiterated my purchase recommendation three weeks ago when the stock was in the high 40's. Over the last three weeks, RRC has done quite well, rising another ten percent during that time.

Despite the rise in the stock, it is still a good long term investment for all of the reasons contained in my post of February 4th. Even so, it is time to take some of the profits on this stock. I suggest one of two possible actions: 1)sell a quarter of your holdings and take the profit. (If you got in at $39 when I recommended RRC, you made about 35% in 4 months, an annualized return in excess of 100%.) 2) The second slternative is to write covered calls for part of your holdings. I recommend writing the June 57.5 calls for about a third of your holdings. These calls will bring in $3.20 per contract as of the present moment and they will still leave you with the possibility of another $3.25 rise in the stock price. If RRC declines a bit as some of the craziness goes out of the energy markets (if it does), the calls will decline and you can close the positions while still holding the RRC stock.

Disclosure: I have sizeable positions in RRC which include both put and call options.

No comments: