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Call Options Plays
Put Options Plays
SHLD UPS

New Calls

Sears Holdings - SHLD - cls: 145.92 chg: +2.96 stop: 139.99

Company Description:
Sears Holdings Corporation is the nation's third largest broadline retailer, with approximately $55 billion in annual revenues, and with approximately 3,800 full-line and specialty retail stores in the United States and Canada. Sears Holdings is the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics and automotive repair and maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard, and a broad apparel offering, including such well-known labels as Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands. It also has Martha Stewart Everyday products, which are offered exclusively in the U.S. by Kmart and in Canada by Sears Canada. The company is the nation's largest provider of home services, with more than 14 million service calls made annually. (source: company press release or website)

Why We Like It:
The RLX retail index was one of the few sector indices that managed to close in the green on Friday. Part of retail's strength was due to a strong bounce in shares of SHLD. Sears has been climbing higher in a very wide and often volatile channel. Friday's rebound marked a rebound from the bottom of its channel near $140.00, which is also boosted by its 200-ema. This looks like a trading opportunity to catch a bounce in SHLD back toward the simple 50-dma near $151. We're going to suggest buying calls here with a target at $151.00-152.00 range. We do need to label this an aggressive play due to SHLD's volatility and our bias that the major indices (DJIA, SPX and NASDAQ) all look poised to consolidate lower. Plus, we plan to exit ahead of Sears earnings report on September 8th and that doesn't give us much time.

Suggested Options:
We are suggesting the September calls.

BUY CALL SEP 140 KTQ-IW OI= 3862 current ask $11.50
BUY CALL SEP 145 KTQ-IV OI= 3056 current ask $ 8.60
BUY CALL SEP 150 KTQ-IU OI=11051 current ask $ 4.40

Picked on August 14 at $145.92
Change since picked: + 0.00
Earnings Date 09/08/05 (confirmed)
Average Daily Volume = 3.2 million
 

New Puts

United Parcel Svc - UPS - cls: 73.06 chg: -0.16 stop: 74.21

Company Description:
UPS is the world's largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. (source: company press release or website)

Why We Like It:
The rebound in shares of UPS from its July lows has stopped dead at the $74.00 level. Investors shouldn't be surprised. As the largest delivery company in the world the record high oil prices and thus fuel prices have to be taking a toll on its bottom line. Yes, it's true that UPS is benefiting from the growth in the U.S. economy and growth overseas (especially China) but short-term we believe the transports as a group will struggle to make new highs. Technicals are already bearish on UPS with a new MACD sell signal in just the past two trading days. Our strategy is to catch a breakdown from UPS' four-week trading range between $72.50 and $74.00. Our suggested entry point will be $71.99. If UPS hits our trigger then we'll target a decline near the bottom of its wider trading range in the $68.00-67.00 range.

Suggested Options:
We are suggesting the October puts although Septembers would work as well.

BUY PUT OCT 75.00 UPS-VO OI=2854 current ask $3.30
BUY PUT OCT 70.00 UPS-VN OI=9896 current ask $1.15

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/21/05 (confirmed)
Average Daily Volume = 2.6 million
 

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