if the company is not stable, the dividend is not stable dividend tax = 33% in 2011. Price won't find a floor until that pipe is plugged up, thats 110%.
You could sell calls and buy puts with the proceeds. Of course dividends are somewhat factored into the price of options at any given time but you could "buy some time" for say a month and see where your at. Or maybe get through Aug when the relief well should be online line and the oil will stop. You can't protect yourself to the point of a risk free way to get a dividend unless the stars really shine on you at the moment your putting the trades on but you could protect yourself from getting kicked in the gut like anyone who bought at 48 thinking it was cheap. Some of the numbers for possible prices are not inline with current oil prices. For example the chart that shows BP hitting a low of 33.70 was also based on oil at a much lower. I think when BP was hitting the lows oil was also trading much lower than it is today. I think we are seeing pricing that reflects a worst possible case that is unlikely but not impossible of course. anything other than a worst case means in my opinion a lot of money will be made by those that are smart/crazy enough to buy when buying means getting out of your comfort zone. At some point the price goes low enough that it simply can't go lower because it will be bought out. since I have yet to read anything credible that says the potential losses could be over two years profit AND the losses that are taken most likely will mostly not need to be paid right away it is hard for me to see this stock STAY down below these levels for long absent some other major problem like another rig puking etc....
For deep value investing you want to buy the stock at a price such that no plausible scenario would result in permanent loss of capital, and you are buying it for at least 50% less than its estimated long-term fair value. So, I would be a buyer probably in the $11-16 range.
I just wanted to follow up that I sold my BP shares in pre-market (+$912). I use the actual stock for day or overnight trading. I use options for swing or longer (writing naked puts) and I have 14 options including ITM and OTM wrote. I will remain net long BP at this price level but through naked puts for my longer term value play and stocks for intraday in selective times. I will also look to trade again (to the long) based my signals for entry. Best to everyone with BP
I don't think "support" levels will matter. This thing is new driven. So, I will let to PA and chart tell me where to buy. Buying before the PA says to is like trying to stop a freight train with your face.
I bought 1000 shares at around $37 and 10 put contracts @ 40. I'll hold this dog for 1 month and then see where we are. I'm willing to take no profits between here and $45 to get BP at these prices and this dividend yield. If we haven't recovered to at least $45 in a month, then I'm outtie. I figure the risk-reward at this point should be decent. If news gets worse, then I'll lose a few thousand, but if things stabilize over the course of this month then I'll be doing okay, and I'll start writing OTM calls on 500 shares to generate some income.
Live FEED of oil leak!!!!! http://www.huffingtonpost.com/2010/05/26/bp-oil-spill-live-feed-vi_n_590635.html
<object width="480" height="385"><param name="movie" value="http://www.youtube.com/v/GKBKAHdlWbI&hl=en_US&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/GKBKAHdlWbI&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="385"></embed></object>