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Call Options Plays
Put Options Plays
APC CCL
  KOSP

New Calls

Anadarko Petrol. - APC - close: 89.90 chg: +2.74 stop: 86.99

Company Description:
Anadarko Petroleum Corporation's mission is to deliver a competitive and sustainable rate of return to shareholders by developing, acquiring and exploring for oil and gas resources vital to the world's health and welfare. As of year-end 2004, the company had 2.37 billion barrels of oil equivalent of proved reserves, making it one of the world's largest independent exploration and production companies. Anadarko's operational focus extends from the deepwater Gulf of Mexico, up through Texas, Louisiana, the Mid-Continent, western U.S. and Canadian Rockies and onto the North Slope of Alaska. Anadarko also has significant production in Algeria, Venezuela and Qatar, and exploration or production positions in several other countries. (source: company press release or website)

Why We Like It:
We have remained bullish on oil and oil stocks but have hesitated about re-entering new bullish positions. We had hoped that the group might offer a deeper consolidation and thus a better entry point before going long stocks in the group again. Right now crude oil shows no signs of slowing down so we're going to carefully offer a bullish play in APC. Unlike many of its peers APC has been consolidating sideways (between $84 and $90) over the last month instead of hitting new highs. Yet now the stock looks poised to breakout over resistance at the $90 level. We are going to suggest using a trigger at $90.51 to open the play. Our short-term target is the $94.75-95.00 range.

Suggested Options:
We are suggesting the September calls.

BUY CALL SEP 90.00 APC-IR OI=1020 current ask $3.40
BUY CALL SEP 95.00 APC-IS OI= 967 current ask $1.50

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/29/05 (confirmed)
Average Daily Volume = 2.0 million
 

New Puts

Carnival Corp - CCL - close: 51.79 chg: -0.68 stop: 54.01

Company Description:
Carnival Corporation & plc is the largest cruise vacation group in the world, with a portfolio of 12 cruise brands in North America, Europe and Australia, comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn Cruise Line, Windstar Cruises, AIDA Cruises, Costa Cruises, Cunard Line, Ocean Village, P&O Cruises, Swan Hellenic, and P&O Cruises Australia. Together, these brands operate 79 ships totaling more than 137,000 lower berths with 12 new ships scheduled for delivery between January 2006 and April 2009. Carnival Corporation & plc also operates the leading tour companies in Alaska and the Canadian Yukon, Holland America Tours and Princess Tours. (source: company press release or website)

Why We Like It:
CCL turned in very impressive gains over 2003 and 2004 but 2005 has been a year of consolidation. The stock did bottom back in late April but shares have now broken the three-month rising trend when CCL broke down below its simple 200-dma in late July. The P&F chart helps paint a bigger picture that points to a bearish $38 price target. It's also worth noting that analyst firm Prudential dropped coverage on CCL back on July 25th. It's common these days for a firm to just drop coverage instead of issue a "sell" recommendation since many of these firms are trying to keep or gain investment-banking relationships with the companies they cover. We are suggesting bearish positions here given today's failed rally and decline under its simple 100-dma and its exponential 200-dma. Our target is the April lows but we'll set the official exit in the $47.75-47.00 range. We do plan to exit ahead of CCL's mid-September earnings report.

Suggested Options:
We are suggesting the September puts since we plan to exit ahead of the company's earnings report.

BUY PUT SEP 55.00 CCL-UK OI=499 current ask $3.70
BUY PUT SEP 50.00 CCL-UJ OI=916 current ask $0.85

Picked on August 10 at $ 51.79
Change since picked: - 0.00
Earnings Date 09/15/05 (unconfirmed)
Average Daily Volume = 2.5 million

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KOS Pharma - KOSP - close: 71.11 chg: -3.81 stop: 72.51

Company Description:
Kos Pharmaceuticals, Inc. is a fully integrated specialty pharmaceutical company engaged in developing, commercializing, manufacturing and marketing proprietary prescription products for the treatment of chronic diseases. The Company's principal product development strategy is to reformulate existing pharmaceutical products with large market potential to improve safety, efficacy, or patient compliance. The Company currently markets Niaspan and Advicor for the treatment of cholesterol disorders, Azmacort for the treatment of asthma, Cardizem LA for the treatment of hypertension and angina, and Teveten and Teveten HCT for the treatment of hypertension. Kos is developing additional products, has proprietary drug delivery technologies in solid-dose and aerosol metered-dose inhalation administration and is pursuing certain strategic business development and licensing opportunities. (source: company press release or website)

Why We Like It:
There is no denying the strength in shares of KOSP. Yet we suspect that the stock may have topped. Shares spiked higher on August 4th after reporting better than expected earnings but there was no follow through to the new high. The move almost looks like a small double-top when combined with the spike higher on July 20th. News out today could also spark some profit taking in the stock. In KOSP's 10-Q report the company disclosed that they had received a subpoena from the government to investigate KOSP's marketing practices. Here is an excerpt from their 10-Q:

"In February 2005, Kos learned that the Office of the Inspector General of the U.S. Department of Health and Human Services, in conjunction with the U.S. Department of Justice, is conducting an investigation of Kos sales practices. In March 2005, the United States Department of Justice, through the Office of the United States Attorney for the Eastern District of Wisconsin, served a grand jury subpoena on Kos. The subpoena requests production of a variety of documents related to Kos marketing and sales practices. Kos has produced a number of documents in response to the subpoena and continues to provide the government with additional responsive documents. Kos has also engaged outside counsel to assist it in conducting its own internal investigation of its sales practices."

As you know these types of investigations can turn into deeper probes and tend to undermine investor confidence in the stock. If it turns out to be nothing it's still a great excuse for traders to lock in some profits here. Looking more closely at KOSP's chart we see that its RSI and stochastics have turned bearish. Plus, we see that if KOSP trades under the $68.00 level it will reverse its P&F chart into a new sell signal. We are going to suggest that traders use a trigger at $68.25 to open the play. More conservative traders may want to use a trigger under its simple 50-dma instead. Our target will be the $62-60 range.

Suggested Options:
We are suggesting the September puts.

BUY PUT SEP 70.00 KQW-UN OI=255 current ask $3.00
BUY PUT SEP 65.00 KQW-UM OI=318 current ask $1.45

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/04/05 (confirmed)
Average Daily Volume = 642 thousand
 

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