BP has real assets, pegged to real commodities. At the moment the stock is trading around its book value. If I were to believe Yahoo Finance, it is trading approximately 9% below book value.
Due to the liability uncertainty I believe the stock will trade around book value, buying the stock when BP is below it and selling the stock when BP is above it.
The other day I realized that if BP begins to trade too much below book value, the market is either being extremely inefficient or predictive. I have come to the conclusion, if the 29 support level is broken, the divergence between book value and stock price will indicate the market will be predicting.
So, as a fixed cost hedge, I purchased a few Jan 2011 puts (with $10 strike). I have no concern to completely lose this amount of cash as the options are around $0.60. I believe I will more than cover this cost trading BP, and if 28.50 is breached on BP I will sell the stock and let the options simply ride.
(PS... The CEO attending the Yacht race over the weekend merits a complete termination from the company. For a man so in love with the sea, I am shocked he is not pushing his company to do more to clean up as the spill is taking place. The man is either too stupid or too apathetic. He should be fired.)