Clean vs. Not-So-Clean Energy

While I have not mentioned it much on the blog, one of my favorite sectors to invest in is the energy sector. When it comes to energy ETFs, the 800 pound gorilla is XLE, the energy select sector SPDR that trades over 20 million shares on a typical day. XLE’s holdings are heavily tilted toward the major integrated oil companies, with Exxon Mobil (XOM) and Chevron (CVX) accounting for slightly more the 1/3 of the ETFs holdings, followed by ConocoPhillips (COP), Schlumberger (SLB), Occidental Petroleum (OXY), etc.

With cap and trade legislation passing the House over the weekend, investing in the energy space is getting even more interesting. XLE is up this morning, as are the popular oil services ETF, OIH (the top five holdings favor drillers and include RIG, SLB, DO, BHI and NE) and the exploration and production ETF, XOP (top five holdings are XEC, PXD, EAC, INT and HK.)

There are a variety of ETFs out there in the clean/green space. Perhaps the best known of these and certainly the most popular is PowerShares WilderHill Clean Energy (PBW), whose largest holdings include a healthy dose of solar companies (top five holdings are FSYS, VLNC, SOLR, ESLR, SOL.) Among the more interesting alternatives is a sibling ETF, PowerShares WilderHill Progressive Energy (PUW), which places more emphasis on energy efficiency and nuclear power and has a list of top holdings which includes MX.TO, ES, PX, USU and CCO.TO. For a solar-only ETF play, Claymore/MAC Global Solar Energy (TAN) is an excellent bet. Note that many of the holdings of TAN are not traded on U.S. exchanges. The current top five holdings are MBTN.SW, FSLR, S92.BE, CTN.DU and SWV.BE. Also in the top ten holdings are two Chinese solar companies whose ADRs are available in the U.S.: STP and TSL.

In the chart below, I have highlighted my favorite all-purpose clean energy ETF, PBW and have included a ratio of PBW to XLE in order to get a sense of the relative performance of clean energy with respect to the broad energy sector. While PBW has pulled back with the broader market during the past three weeks, it has continued to perform strongly against the broad energy sector ETF. As the ratio chart hints at, pairs trades involving clean energy ETFs such as PBW, PUW and TAN vs. XLE, XOP and OIH are one way to play the Washington energy legislation game going forward.

[source: StockCharts]

Disclosure: Long OIH, DO, INT and TSL at time of writing.

Options Action Debuts, Looks Like Fast Money With Options Trades

Options Action is a new options-oriented show that made its debut on CNBC on Friday night at 11:30 ET. Hosted by Melissa Lee, the show is clearly an options derivative of Fast Money, from the format to the graphics to the audio.

Given the choice between targeting options-savvy viewers and a broader audience, CNBC has elected to aim for the generalist audience by emphasizing the news and issues, while including some recommended stock trades along with the options trades. If you have a casual interest in options, this show could help grow your knowledge base; if you already consider yourself to be a relatively sophisticated options trader, Options Action is not likely to have a great deal of appeal.

The format relies on current news and investment issues, with Melissa Lee keeping things moving by prompting the guests for some brief analysis and asking for recommended stock and options trades. Financials were the top story on Friday, with some debate about the plight of Wells Fargo (WFC). Steve Jobs and Apple (AAPL); crude oil; and Microsoft (MSFT) vs. Google (GOOG) were the other items on the agenda.

For a debut offering, I thought guests Joe Terranova, Stacey Gilbert, Jim Iurio, Mike Khouw and Brian Stutland did an excellent job of bringing a variety of perspectives to bear on each issue, with reasonably strong interplay among the group. My favorite part of the show centered around the discussion of a naked sale of Google June 300 puts for 43.00, as recommended by Stutland, or selling a put spread instead, as recommended by Gilbert.

In terms of options-specific material that you might not find on Fast Money, in addition to the proposed options trades, there was a quick blurb on unusual options volume at United Technologies (UTX) as well as several charts that showed five day options volume trends in some of the other featured companies. Other than that, the name of this program could easily have been Fast Money: Options Edition.

CNBC has Friday’s show archived in three parts for anyone who wants to see what they missed:

• Part 1 -- Wells Fargo and the financials; Apple; crude oil
• Part 2 -- Microsoft vs. Google
• Part 3 -- Final trades: Apple, ConocoPhillips (COP), Microsoft, infrastructure plays