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Call Options Plays
Put Options Plays
GS ABK
ESE

New Calls

Goldman Sachs - GS - close: 103.67 chg: +1.65 stop: 101.89

Company Description:
Goldman Sachs is a leading global investment banking, securities
and investment management firm that provides a wide range of services
worldwide to a substantial and diversified client base that includes
corporations, financial institutions, governments and high net worth
individuals. Founded in 1869, it is one of the oldest and largest
investment banking firms. The firm is headquartered in New York and
maintains offices in London, Frankfurt, Tokyo, Hong Kong and other
major financial centers around the world. (source: company press release)

Why We Like It:
The XBD broker-dealer index is showing incredible amounts of relative strength. The group broke out to a new high on Friday compared to the rest of the market, which was sinking. GS did its part to push the sector index higher with a 1.6 percent gain of its own. Furthermore GS' rally on Friday was fueled by stronger than average volume and pushed it back above technical resistance at its 200-dma. We like to see this kind of strength on a down market day but GS still has resistance near $104.00, which is the top of its weeklong trading range. We're suggesting that readers use a trigger above the June 17th high. Our entry point will be $104.35. GS' P&F chart currently points to a $123 target. We will target a move into the $109.50-110.00 range. We will try and limit our risk with a relatively tight stop under the lower edge of the trading range and its 50-dma. 

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 100.00 GS-HT OI= 787 current ask $5.20
BUY CALL AUG 105.00 GS-HA OI=1601 current ask $2.25
BUY CALL AUG 110.00 GS-HB OI= 392 current ask $0.75

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 06/16/05 (confirmed)
Average Daily Volume = 4.8 million

New Puts

Ambac Fincl. - ABK - close: 69.62 chg: -0.88 stop: 71.51

Company Description:
Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac's principal operating subsidiary, Ambac Assurance Corporation, is a leading guarantor of municipal and structured finance obligations. (source: company press release)

Why We Like It:
ABK has been languishing for weeks now. The stock was hammered back in April but managed to rebound back toward the bottom of the gap down in the $72-73 range. Yet buyers were unable to push the stock any higher and the stock has been withering under a slow decay of lower highs against support near the $70.00 level. Friday's market sell-off was enough to pull ABK under support. We want to use it as a new bearish entry point with a target in the $65.50-65.00 range. We have just under a month as we do not plan on holding over the July earnings report. 

Suggested Options:
We are suggesting the August puts.

BUY PUT AUG 75.00 ABK-TO OI=838 current ask $6.00
BUY PUT AUG 70.00 ABK-TN OI=174 current ask $2.65
BUY PUT AUG 65.00 ABK-TM OI=211 current ask $1.00

Picked on June 26 at $ 69.62
Change since picked: + 0.00
Earnings Date 07/20/05 (unconfirmed)
Average Daily Volume = 992 thousand 

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ESCO Tech. - ESE - close: 97.80 chg: -1.80 stop: 102.51

Company Description:
ESCO, headquartered in St. Louis, is a leading supplier of engineered filtration products to the process, health care and transportation markets worldwide. In addition, the Company markets proprietary, special purpose communications systems and is the industry leader in RF shielding and EMC test products. (source: company press release)

Why We Like It:
ESE is an aggressive bearish candidate. We consider it aggressive because longer-term we're bullish on the stock. Yet over the last month or so the stock appears to have really gotten ahead of itself. The upward momentum staled back in early June after a small double-top near $106. Ever since the stock has been consolidating sideways and the recent market sell-off has sparked some profit taking. We suspect that the profit taking isn't over yet and most of its technical indicators are all pointing lower. We also consider this an aggressive play because we normally don't play stocks with average daily volume under 300,000. This low volume is also seen in its options. We think the breakdown under round-number, psychological support at the $100.00 mark is a bearish entry point. We don't see any support until the $87.50-90.00 region. We're going to suggest buying puts with a $92-90 target range. 

Suggested Options:
We are suggesting the August puts although Septembers are also available. 

BUY PUT AUG 100.00 ESE-TT OI= 0 current ask $6.40

BUY PUT SEP 100.00 ESE-UT OI= 0 current ask $7.30
BUY PUT SEP 95.00 ESE-US OI= 7 current ask $5.50
BUY PUT SEP 90.00 ESE-UR OI= 15 current ask $3.70

Picked on June 26 at $ 97.80
Change since picked: + 0.00
Earnings Date 08/10/05 (unconfirmed)
Average Daily Volume = 102 thousand 

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