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New Option Plays

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Call Options Plays
Put Options Plays
None AZO
  BBY
  FNM
  KBH

New Calls

None today.
 

New Puts

AutoZone - AZO - close: 98.13 chg: -1.01 stop: 100.01

Company Description:
As of May 7, 2005, AutoZone sells auto and light truck parts, chemicals and accessories through 3,505 AutoZone stores in 48 states plus the District of Columbia in the U.S. and 73 AutoZone stores in Mexico and also sells the ALLDATA brand diagnostic and repair software. (source: company press release or website)

Why We Like It:
Now that the broader stock market averages are showing a little weakness it is easier to see that we could be on the verge of a more pronounced consolidation lower. Thus if the markets are poised to move lower we like the odds of buying puts on AZO here. The stock has rallied toward resistance in the $100 region and a failure here could produce a double-top pattern. Technical oscillators like the RSI and stochastics are already turning lower and its MACD is hinting at a new sell signal soon. We will suggest new bearish positions here with a stop loss at $100.01. More conservative traders may want to wait for a decline under $97.50 before opening positions. Our target is the 50-dma near $92.50.

Suggested Options:
We like the September puts.

BUY PUT SEP 100.00 AZO-UT OI= 531 current ask $4.10
BUY PUT SEP 95.00 AZO-US OI= 461 current ask $1.95
BUY PUT SEP 90.00 AZO-UR OI=2048 current ask $0.90

Picked on July 25 at $ 98.13
Change since picked: - 0.00
Earnings Date 09/20/05 (unconfirmed)
Average Daily Volume = 748 thousand

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Best Buy Co - BBY - close: 73.61 chg: -1.30 stop: 76.61

Company Description:
Best Buy Co., Inc. is an innovative Fortune 100 growth company that continually strives to create superior customer experiences. Through more than 840 retail stores across the United States and in Canada, our employees connect customers with technology and entertainment products and services that make life easier and more fun. We sell consumer electronics, home-office products, entertainment software, appliances and related services. A Minneapolis-based company, our operations include: Best Buy (BestBuy.com and BestBuyCanada.ca), Future Shop (FutureShop.ca), Geek Squad (GeekSquad.com) and Magnolia Audio Video (Magnoliaav.com). (source: company press release or website)

Why We Like It:
This play here in BBY is very similar to the one in LEH. Both have been very strong stocks over the past several weeks and both look extremely overbought and extended and way overdue for some profit taking. Both plays are also very speculative and should only be played with high-risk money. The challenge is whether or not investor's urge to lock in profits will overpower those bulls still on the sidelines looking to buy the next dip. We believe that with the broader market averages poised to turn lower after last month's rally that BBY will turn lower as well. Yet just to be sure we're going to use a trigger at $73.25 to open the play. Until BBY trades at our trigger or lower we'll sit out. There could be some support near the $70 level but we're going to target the 40-dma currently at $67.00 (and we'll adjust the target higher as the 40-dma climbs). It is worth noting that BBY is due to split its stock 3-for-2 on August 4th and that will probably impact the change in option values (and the symbols).

Suggested Options:
We are going to suggest the September puts.

BUY PUT SEP 75.00 BBY-UO OI=2658 current ask $3.90
BUY PUT SEP 70.00 BBY-UN OI=3630 current ask $1.80
BUY PUT SEP 65.00 BBY-UM OI=9455 current ask $0.80

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 06/14/05 (confirmed)
Average Daily Volume = 3.3 million

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Fannie Mae - FNM - close: 57.51 chg: -0.89 stop: 59.51

Company Description:
Fannie Mae is a New York Stock Exchange Company. It operates pursuant to a federal charter. Fannie Mae has pledged through its American Dream Commitment to expand access to homeownership for millions of first-time home buyers; help raise the minority homeownership rate to 55 percent; make homeownership and rental housing a success for millions of families at risk of losing their homes; and expand the supply of affordable housing where it is needed most. (source: company press release or website)

Why We Like It:
It has been a rough year for FNM shareholders and it looks like the stock is poised to turn lower yet again. The rally from its April lows is starting to look more and more like an oversold bounce. If you look at the chart you can see that the rally stalled under its exponential 200-dma and near its 50% retracement level. Today's breakdown under the simple 50-dma looks like a new bearish entry point but we want to be sure. We're going to suggest a trigger at $56.49 to open the play. This is under potential technical support at the 100-dma near $56.75. Our target will be the $51.50-50.00 range.

Suggested Options:
The only options we could find were January strikes. These are for January 2006.

BUY PUT JAN 60.00 WFN-ML OI=11178 current ask $4.80
BUY PUT JAN 55.00 WFN-MK OI=17631 current ask $2.50
BUY PUT JAN 50.00 WFN-MJ OI=32419 current ask $1.25

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/05 (unconfirmed)
Average Daily Volume = 3.3 million

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KB Home - KBH - close: 80.00 chg: -3.45 stop: 82.51

Company Description:
Building homes for nearly half a century, KB Home is one of America's premier homebuilders with domestic operating divisions in some of the fastest-growing regions and states: West Coast-California; Southwest-Arizona, Nevada and New Mexico; Central-Colorado, Illinois, Indiana and Texas; and Southeast-Florida, Georgia, North Carolina and South Carolina. Kaufman & Broad S.A., the Company's publicly-traded French subsidiary, is one of the largest homebuilders in France. In fiscal 2004, the Company delivered homes to 31,646 families in the United States and France. (source: company press release or website)

Why We Like It:
We are actually bullish on the homebuilders but it looks like the rally is running out of steam. The DJUSHB home construction index has failed to rally past the 1100 mark for the last two days and its technical indicators have turned bearish. Meanwhile KBH has also shown similar indicators that it's about to turn lower with a new MACD sell signal and weakness in its RSI and stochastic indicators. We want to remind readers that bearish positions on the homebuilders have been very risky over the past couple of years. The group has been incredibly strong and leaving a wake of injured bears in its path. This is a speculative play based on how the major stock indices look and the technicals on KBH. The trend is still very much up for the stock. Our concern is that when it drops it will probably drop quickly. More conservative traders may want to wait for the DJUSHB index to close under the 1050 level first or wait for KBH to trade under its 21-dma before initiating bearish positions. Our suggested entry point will be at $79.85. Our short-term target is the $75.00 level. FYI: one of the biggest risks in this play are upcoming earnings from fellow homebuilders. One to watch for is PHM who reports on July 27th.

Suggested Options:
We are going to suggest the September puts although August puts will probably work and have more open interest.

BUY PUT SEP 80.00 KBH-UP OI=692 current ask $4.20
BUY PUT SEP 75.00 KBH-UO OI=443 current ask $2.25

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 09/15/05 (unconfirmed)
Average Daily Volume = million
 

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