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Wednesday Ruling – Royal Dutch Shell (RDS.A) Ordered to Cut Emissions by 45%

This is interesting.

RDS.A has been ordered by a Dutch Court (home country) to cut emissions by 45% by 2030 – just 8.5 years from now.  Shell in February set out plans to gradually reduce its oil output and expand in areas including electricity and biofuels. Other big oil companies have also pledged to reduce their dependence on fossil fuels and invest more in low-carbon energy amid growing pressure from activists, investors and governments but the Dutch court has ruled that those plans don't go far enough and Shell is under their jurisdiction.  

Most European Oil Companies plan to reduce emissions by 2% annually, this is a court-ordered 5% and the Dutch Court is very likely to set the tone for similar action in the EU.  US companies, by contrast, have done nothing at all to curb climate emissions but that may change when the Biden Administration finally has time to focus on that catastrophe (one catastrophe at a time so far).  

The district court in The Hague, ruling in a case brought by environmental organizations, said its decision was based on broadly accepted United Nations guidance aimed at limiting global warming and human-rights-related law that is similar across Europe. The ruling could set a precedent, at least in Europe, that individual companies (not just oil companies) bear a legal responsibility to protect people from climate change.  Companies in various industries have already grasped the ruling’s potential ripple effects, such as whether they will need to speed up plans to reduce their emissions.

PHOTO: A graph depicts the upward trajectory of carbon dioxide in the atmosphere as measured at the Mauna Loa Atmospheric Baseline Observatory by NOAA and the Scripps Institution of Oceanography. The annual fluctuation is known as the Keeling Curve. Legal experts don’t expect the Shell ruling to have a big influence in the U.S. American law is likely to be less favorable to environmental groups, they said, because, unlike European courts, most federal courts haven’t recognized a constitutional right to a clean environment.  Local governments in the U.S. have instead tried to use common-law nuisance claims to force companies to pay the costs of adapting to the effects of climate change. Most of those cases are pending.  

Overall there are around 1,800 lawsuits related to climate world-wide, according to a database produced by Columbia University’s Sabin Center for Climate Change Law, most of which are in the U.S. – this is why Businesses are willing to spend so much to back a party that will pack the courts with Conservative judges who are willing to let them continue destroying the environment – literally until it is too late to stop them.  

The loss of the ice sheets WILL be raising the sea levels by 7 meters (21 feet) over the next 100 years with effects that will be more and more catastrophic each year.  That's already accelerating the loss of Permafrost which, unfortunately, has been trapping additional gigatons of CO2 since the Ice Age – even if we reduce our own emissions to zero – the Permafrost can still keep adding to the problem.  This is the evidence the courts are weighing and, even if the US, Chinese and Russian courts are willing to ignore the facts, we are still going to be subject to rulings in the rest of the World.

Exxon (XOM) has a $10Bn project in Guyana that's currently on hold over an environmental lawsuit.  Last month, two citizens sued the government in the South American country’s constitutional court, seeking to block all oil production. The plaintiffs argued that the project would worsen climate change and violated the government’s legal duty to protect citizens’ rights to a healthy environment.

We'll see what kind of trend this is but, overall, I'd be careful investing in oil companies and other polluting industries.  The Trump Administration may have derailed Global climate action but John Kerry and the Biden Administration have only just started their mission to get things back on track and maybe even save the World in the process.  Maybe…

 


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  1. Good Morning.


  2. Good morning, everyone. Here is the link to today's webinar.

    https://attendee.gotowebinar.com/register/59978774845546768


  3. Phil / hedges

    Good morning, would you advise TQQQ put hedge at this time and which specific legs would you use? TIA 


  4. NRG / Phil

    Good morning. I have both 2023 25 and 30 naked calls. Im going to sell the 30's now that it's recovered. I was hoping to sell 35's for $8 to cover the 25's but still only $6.6 at best.      NRG is on a good run but no news. Do you think there's room to run or time to cover?  




  5. oil report is worth looking at today looks like net build to me


  6. EIA Petroleum Inventories: Crude -5.2M barrels vs. -2.0M consensus, -5.1M last week.

    EIA Gasoline +7.0M vs. +0.7M consensus, +1.5M last week.

    EIA Distillates +4.4M vs. +1.4M consensus, +3.7M last week.


  7. Good morning!

    TQQQ/Hwtdr – When we did our last STP review, our TQQQ position was up $14,000 and now it's up less than $5,000.  It's a $40,000+ spread but has a lot of time to sell more short puts and we collected $10,000 for the short June puts in May, so $10,000 for 45 days and we have 226 days left to sell (but the VIC is lower), so figure at least 4 more sales could bring in $20,000 PLUS it's a nice hedge.  

    TQQQ Long Put 2022 21-JAN 120.00 PUT [TQQQ @ $105.94 $0.92] 20 4/15/2021 (226) $60,000 $30.00 $-1.95 $34.22     $28.05 $-0.50 $-3,900 -6.5% $56,100
    TQQQ Short Put 2021 18-JUN 100.00 PUT [TQQQ @ $105.94 $0.92] -10 5/4/2021 (9) $-10,000 $10.00 $-8.39     $1.61 $-0.26 $8,390 83.9% $-1,610

    The overwhelming premise here is that the Nasdaq doesn't go much higher this year and we retail the value on the long puts.  Any money we make selling short puts is a bonus.  As a new spread, I'd want more time so I'd go for:

    • Buy 20 2023 $110 puts for $35 ($70,000) 
    • Sell 15 2022 $95 puts for $15.50 ($31,000) 
    • Sell 10 July $100 puts for $5 ($5,000) 

    That's net $34,000 on the $30,000 spread but you have 590 days to sell and only used 37 so far so even just 10 good sales will bring in $50,000 and give you a free spread.  If TQQQ goes down more than $10, you roll them along and you can always buy 5 more long puts to cover.  

    By the way, the STP is still up 19%, so down 20% since May 14th is not bad for our hedges.

    NRG/Jeddah – Just depends how conservative you want to play it.   I think $30 is a very good floor.  I'd sell the $25s and take the $4 off the table and then you have the $30s at $8.50 and you can ask for $4 for the $40s and worst case is you take that for the $37s if $36 fails to hold and then you are in for net $4.50 with at least $2.50 in upside, hopefully $5.50 and next time it dips you can sell puts and use that money to widen the spread again.

    Oil/Tommy, Rick – Big draw but it was supposed to be as this was the week ending June 4th, so this was our big holiday weekend and the week before was a disappointment and this was supposed to be the big one – now disappointing too.   Certainly not supportive of $70, which is my average short (4) after adding 2 more at $70.50.  


  8. Oh, obvious but forgot to mention the build in gasoline shows demand wasn't there so that's a total disaster.  They will push the headline number but you can't fool too many people with just that – especially when it's swamped by the builds in Gasoline and Distillates (and, keep in mind we're EXPORTING 3Mb/d of those too!).  



  9. AIV is a nice little Apartment Management company that split off AIR (the actual apartments) from their REIT so they are just focused on managing and refurbishing apartments now.  I don't think AIV was getting any credit at $1.1Bn in market cap – even after they've run up to $7.50.

    This is the same good management they had before – they are just splitting the business, which I think we're getting for free against the asset value ($8/share) of the company.  It's a long-term growth thing but they don't have long-term options though the ones they do have are actively traded so, in the Dividend (which they don't pay yet) Portfolio, let's:

    • Buy 2,000 shares of AIV for $7.61 ($15,220) 
    • Sell 20 AIV Dec $7.50 puts for $1 ($2,000) 
    • Sell 20 AIV Dec $7.50 calls for $1.10 ($2,200) 

    That gives us a net entry of $11,020 or $5.51 per share and, if assigned 2,000 more at $7.50, we're average $6.50, which is a nice discount to the current price (and then we'd sell more calls to drop to $5.50).  AIV does not yet pay a dividend (no profits) but, if we get called away at $7.50, that's a $3,980 (36% profit in 6 months) or, if we end up owning $22,000 worth (4,000 shares) at $5.50, just selling 10 calls for $1,000 is the same as getting a 5% dividend – and that's what we'd be getting every 6 months. 


  10. any idea what kind of drop we can hope for in oil phil


  11. Oil/Tommy – I would think we should test $68.50 again but by next week we're subject to the July 4th run-up so there's no sense being heroic.  We're below $70 now so $70 is the stop and below $69.50 that would be the next stop, etc.  

    Cowen (COWN) is a company most of us have heard of but none of us have given a second thought.  I was looking over some financials and they came up and I noticed that their strong run to $34.13 is well-deserved as that's still just a $1Bn market cap and COWN has grown to $1.8Bn in revenues and dropped $200M to the bottom line last year so p/e about 5 still.   They took a lot of business during the pandemic and they aren't giving it back (as they are still tiny compared to other IBanks) and I think they are consolidating for a move higher.  Since they are a Bankster of the Future, we can add them to our Future is Now Portfolio as such:

    • Sell 5 COWN June 2022 $35 puts for $5.50 ($2,750)
    • Buy 10 COWN June 2022 $35 calls for $9 ($9,000)
    • Sell 10 COWN January $40 calls for $5 ($5,000) 

    That's net $1,250 on the $5,000 spread but we have 7 months to roll the short Jan $40 calls so I'd say at least the June 22 $45s, which are already $5 and hopefully the $50s and then we'd have a $15,000 spread but. for now, we'll call it a $3,500 (280%) upside potential – which does not suck.  


  12. Phil,

    The "COWN" chart is for COOP.


  13. Thanks JPH, that's another one I've been looking at.


  14. Phil,

    Apparently lots of good "options" today. 

    IBM @ 52 week High


  15. A little PM selling pressure.


  16. Phil// Clarification on the below trade you had mentioned, is the short call Jun or Jan? I am not getting the fill for the prices you have mentioned.

    Sell 5 COWN June 2022 $35 puts for $5.50 ($2,750)

    Buy 10 COWN June 2022 $35 calls for $9 ($9,000)

    Sell 10 COWN January $40 calls for $5 ($5,000) 

    Thanks.


  17. COWN/Rookie – Short calls are Jan 2022.  They are currently $4.90/$5.30 so very sad if you can't get a fill on those.

    Someone just sold the June 2022 $35 puts for $5.70 

    And the June 2022 $35 calls have been going off at $9.20.

    Not sure who your broker is but maybe it's poor execution on their part (which is why I left Fidelity, ML and Options Express) or maybe you just need to be more patient?


  18. Keystone pipeline canceled after Biden had blocked permit