Option Trade 
ONEOK, Inc. (NYSE:OKE) Calls 
Monday, 31st October, 2016

** OPTION TRADE: Buy the OKE JAN 20 2017 50.000 call at approximately $2.05. Place a pre-determined sell at $4.10.

 Note: No protective stop losses added -- but if you wish to do so make it $0.80.

by Ian Harvey

October 31, 2016

ONEOK, Inc. (NYSE:OKE), the sole general partner of ONEOK Partners, L.P. (ONEOK Partners), a master limited partnership engaged in the gathering, processing, storage and transportation of natural gas in the United States,  is expected to beat expectations when it reports third-quarter 2016 results after the closing bell tomorrow, Nov 1. Last quarter, this stock had reported a negative surprise of 2.38%.

Rising popularity of natural gas due to its clean-burning and affordable nature resulted in excessive production in the third quarter. This will likely add to ONEOK's top line in the third quarter as higher natural gas production will warrant higher use of the company's services. Moreover, ONEOK's contract restructuring initiatives and cost reduction efforts will continue through the third quarter, boosting its cash flows.

ONEOK anticipates natural gas liquids volume growth to be higher in the second half of 2016 than the first, driven by higher demand. Further, an increase in ethane demand due to a rise in petrochemical facilities and higher exports to Mexico spurred by growing demand in the third quarter will boost third-quarter revenues.

ONEOK has contracted 92% of its transportation capacity and 71% of its storage capacity, thereby increasing visibility on third-quarter revenues.

Oneok has a 50 day moving average price of $49.29 and a 200 day moving average price of $45.11. Oneok has a 1-year low of $18.84 and a 1-year high of $51.72. The firm has a market cap of $10.14 billion, a PE ratio of 36.64 and a beta of 1.10.

Why ONEOK, Inc.?

It's hard not to love a stock that's gone up nearly 110% so far this year, which is the case for ONEOK, Inc. (NYSE: OKE) .

But there's more to it: The company has a great opportunity to continue growing as demand for natural gas continues to expand in North America. ONEOK's network of pipelines and gathering is set for strong growth for years to come, and that should lead to regular increases in ONEOK's dividend, which -- even after a more than doubling of ONEOK's stock price -- still yields 4.7%.

Put it all together, and you have a great company whose stock has strong price appreciation potential.

Analyst Input

Zacks Investment Research upgraded Oneok from a “hold” rating to a “buy” rating and set a $51.00 target price for the company in a report on Tuesday, July 26th.

Royal Bank Of Canada increased their target price on Oneok from $39.00 to $46.00 and gave the company a “sector perform” rating in a report on Tuesday, August 16th.

 RBC Capital Markets restated a “sector perform” rating and issued a $46.00 target price (up previously from $39.00) on shares of Oneok in a report on Tuesday, August 16th.

Finally, Morgan Stanley lowered Oneok from an “overweight” rating to an “equal weight” rating and increased their target price for the company from $48.00 to $50.00 in a report on Tuesday, October 4th. They noted that the move was a valuation call.

 Harvey’s Options Volatility Indicator


Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the OKE JAN 20 2017 50.000 call at approximately $2.05. Place a pre-determined sell at $4.10.

 Note: No protective stop losses added -- but if you wish to do so make it $0.80.

 ”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!

Options traders are not successful because they win.

Options traders win because they are successful.

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