Option Investor
New Plays

New Option Plays

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Call Options Plays
Put Options Plays
None MLM

New Calls

Editor's note:

It was a tough job searching for new plays to add to the newsletter this weekend. We looked at several hundred stocks and found very little that looked like a decent play that didn't have earnings in the next few days or so. The major averages (DJIA, S&P 500 and the NASDAQ) all look short-term overbought and due for a correction. Considering the last statement we really hesitate to add new bullish positions here. The same factors make picking bearish candidates a hazardous task as well. The market can always get more overbought. We are adding one new bearish candidate but suggest that our readers use caution heading into the first real week of the Q2 earnings season.

New Puts

Martin Marietta - MLM - cls: 68.16 chg: -0.26 stop: 70.51

Company Description:
Martin Marietta is the nation's second largest producer of construction aggregates, a leading producer of magnesia-based chemical products and is developing structural composites products for use in a wide variety of industries. (source: company press release or website)

Why We Like It:
MLM is an aggressive bearish candidate. The stock has been a pillar of strength over the last eight weeks but now the stock is overbought and extended. If you believe the technical indicators the next move should be lower. The RSI and stochastics point lower and its MACD indicator produced a sell signal about five days ago. Considering the overbought condition of the major stock indices we're going to suggest buying puts on MLM. Any correction in the markets could easily pull MLM lower as traders lock in profits. However, just to be safe we're going to suggest a trigger under the $68.00 level. Our entry point will be $67.85. Our target will be the $63.00-62.00 range, which is close to a 50% retracement of its May-July rally. The biggest challenge here for the bears is potential technical support at its simple 50-dma near $64. Plus, we have a short time frame. MLM is expected to report earnings in early August and we don't want to hold over the report.

Suggested Options:
We are suggesting the August puts as this should be a short-term play.

BUY PUT AUG 70.00 MLM-TN OI= 5 current ask $3.00
BUY PUT AUG 65.00 MLM-TM OI= 0 current ask $0.95

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/03/05 (unconfirmed)
Average Daily Volume = 313 thousand

New Play Archives