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Thursday, November 09, 2006


Korean Electric Power

I was looking into kep further.. What I noticed is a five year decline in the won. When they talk about nuclear being cheap it isn't that the teknology is cheap it is that it is a fixed cost item and the currency is in a long term decline. North Korea is doing two things, It is help driving up oil prices that they use to create electricity and it is helping the curency to decline and that makes both oil and natural gas more expensive. If you are china you are getting higher oil prices and competing with cheaper south korean goods. I don't know if korea is one of those countries with a large surplus but it would make alot of sence to grab as much non-oil and non natural gas electricty as possible. With china and the U.S. willing to spend money on getting oil reserves the opertunity to get rid of oil demand also makes sence..

How to trade it???

I saw the november and december options both expire befour the ex-div in late december. If it is a short trade then you grab calls as your stop loss. Looks like they may be going for $15 for the $22.50 dec call. Grab a couple and you have a butterfly arangement. If north korea makes a deal like russia did to get rid of the nukes then you might have a realy big jump in the won.. Steel exports are pobily at a international price and not at a korea price so that may do well in a colapsing currency envirement...

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