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Call Options Plays
Put Options Plays
CVH KLAC
TAP

New Calls

Coventry Hlth Care - CVH - cls: 71.74 chg: +0.97 stop: 68.49

Company Description:
Coventry is a national managed health care company based in Bethesda, Maryland operating health plans, insurance companies, network rental services companies, and workers' compensation services companies. Coventry provides a full range of risk and fee-based managed care products and services, including HMO, PPO, POS, Medicare Advantage, Medicaid, Workers' Compensation and Network Rental to a broad cross section of employer and government-funded groups, government agencies, and other insurance carriers and administrators in all 50 states as well as the District of Columbia and Puerto Rico. (source: company press release or website)

Why We Like It:
The healthcare stocks continue to be a pillar of strength in this market. We have had our eye on CVH for a while as it consolidates under resistance in the $72.50 level. Watching the recent action we believe the stock could be on the verge of a breakout to a new all-time high soon. If the markets do react positively to the FOMC announcement tomorrow then we want to position ourselves to catch the next leg higher in CVH. Therefore we are suggesting a trigger above its highs. Our entry point will be $72.75. The Point & Figure chart is currently bullish and points to an $89.00 target. We will target a move into the $77.50-80.00 range. We do not plan on holding over CVH's late July earnings report. 

Suggested Options:
We are suggesting the August calls even through we plan to exit ahead of the late July earnings report.

BUY CALL AUG 70.00 CVH-HN OI= 53 current ask $4.00
BUY CALL AUG 75.00 CVH-HO OI=451 current ask $1.30

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/26/05 (unconfirmed)
Average Daily Volume = 1.0 million 

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Molson Coors - TAP - close: 61.38 chg: +0.44 stop: 59.49

Company Description:
Molson Coors Brewing Company is the fifth largest brewer in the world. It sells its products in North America, Europe, Latin America and Asia. Molson Coors is the leading brewer in Canada, the second largest in the U.K, and the third largest brewer in the U.S. The company's brands include Coors Light, Molson Canadian, Molson Dry, Carling, Kaiser, Coors, and Zima XXX. (source: company press release or website)

Why We Like It:
We like TAP as a bullish candidate for a couple of reasons. First, the stock has been pretty resilient and unaffected by the market's volatility over the last few weeks. Second, the stock appears to have built a new bottom over the last six weeks. Granted the play is not without risk. The P&F chart looks pretty bearish. There is recent news of an SEC inquiry into its merger documents but the stock barely moved on the news. Longer-term TAP is facing heavy competition from BUD but short-term we see potential upside. There is potential resistance at the 50-dma near $62.50 and readers can keep this in mind as they plan their trades. We would not be surprised to see TAP test the 50-dma, pull back for a bit and then rebound higher. We like today's relative strength and breakout over minor resistance at the $61.00 level. We suggest bullish positions here or on a dip back to the $60.50 level, which should be the front line of support. Our target is the $64.00-65.00 range but we'll plan to exit before the company's late July earnings report.

Suggested Options:
We are suggesting the August calls but plan to exit before the late July earnings report.

BUY CALL AUG 60.00 TAP-HL OI= 50 current ask $3.20
BUY CALL AUG 65.00 TAP-HM OI= 23 current ask $1.05

Picked on June 29 at $ 61.38
Change since picked: + 0.00
Earnings Date 07/28/05 (unconfirmed)
Average Daily Volume = 909 thousand

New Puts

KLA-Tencor - KLAC - close: 43.88 chg: -1.39 stop: 45.76

Company Description:
KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related industries. Headquartered in San Jose, Calif., the company has sales and service offices around the world. (source: company press release or website)

Why We Like It:
We are adding KLAC as a bearish candidate based on its technical breakdown today. This is purely a technical play as we can't quantify how much of today's decline may have been caused by investor reaction to the merger news surrounding KLAC. The headlines we're referring to involve August Technology, which just announced it is merging with Rudolph Technologies for $10.50 a share. KLAC already had a bid out for August at $11.50 a share. Looking more closely at KLAC we see a technical breakdown under its simple 200-dma and support at the $44.00 level. The P&F chart for KLAC is already bearish and points to a $24.00 target. We do see potential support for KLAC near the $42.00 level but we're going to target a decline toward the $40.00 region. Some traders may want to pause before considering put positions in KLAC and wait for the SOX semiconductor index to breakdown from its six-week consolidation under support near the 420 level, which it is close to doing. We plan to exit this play before KLAC's late July earnings report.

Suggested Options:
We are suggesting the August puts.

BUY PUT AUG 45.00 KCQ-TI OI=1799 current ask $2.65
BUY PUT AUG 42.50 KCQ-TV OI= 151 current ask $1.45
BUY PUT AUG 40.00 KCQ-TH OI= 360 current ask $0.75

Picked on June 29 at $ 43.88
Change since picked: - 0.00
Earnings Date 07/28/05 (unconfirmed)
Average Daily Volume = 5.4 million 

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