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New Option Plays

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Call Options Plays
Put Options Plays
None ADBE
  IYF
  HSY
  MBI

New Calls

None today.
 

New Puts

Adobe Sys. - ADBE - close: 26.82 chg: -0.43 stop: *see note

Company Description:
Adobe is the world's leading provider of software solutions to create, manage and deliver high-impact, reliable digital content. (source: company press release or website)

Why We Like It:
The trend in ADBE looks rather bearish. There is a clear pattern of lower highs as the stock bounces from support in the $26-27 level over the last several months. The latest dip back in early August helped produce a new Point & Figure chart sell signal that now points to a $19.00 target. One that you'll notice if you study the chart is that ADBE's volatility has narrowed significantly over the last few weeks. That's because investors are waiting to hear from the company when they report earnings on Thursday, September 15th after the closing bell. This is one time we want to hold over the report because we're going to use a neutral strategy to catch any post-earnings reaction. Our plan is to buy an October 27.50 call and an October 25.00 put. Right now the call is trading around $1.00 and the put around $50-55 cents. So hypothetically we only need to see ADBE move more than $1.60 to be profitable. Fortunately the stock has a history of producing some significant post-earnings moves. The goal here is to cash in with a $1.00 to $1.50 profit. When you exit is up to you. Some of you may jump out the moment you get a decent profit. Others may want to hold these options well into the month of October. Since this is a neutral play. We don't care what direction ADBE moves, there is no stop loss.

Suggested Options:

BUY CALL OCT 27.50 AEQ-JY OI=7261 current ask $1.05
-and-
BUY PUT OCT 25.00 AEQ-VE OI=2636 current ask $0.55

Picked on September 13 at $ 26.82
Change since picked: + 0.00
Earnings Date 09/15/05 (confirmed)
Average Daily Volume = 6.2 million

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Ishares DJ Fin. Serv. - IYF - cls: 95.76 chg: -0.56 stop: 96.75

Company Description:
The IYF is an ishares trust designed to track the performance of the Dow Jones Financial sector index.

Why We Like It:
The early September, post-Katrina rally is stalling and we suspect that the markets are poised to move back into its seasonal trends with September as the weakest month of the year for equities. Helping lead the way are some weak banking sector indices. Both the BKX and BIX are turning lower after testing resistance at the top of their descending channels. Instead of trying to pick just one banking stock to play we're choosing to buy puts on the IYF ishares. The weekly chart for the IYF shows a potential double-top and a clear bearish divergence with its MACD indicator (not to mention a recent MACD sell signal). The daily chart shows bearish signals in the RSI and stochastics. We would probably consider this a speculative play but we're going to try and significantly limit our risk with a tight stop at $96.75. If the IYF does not produce any follow through on what looks like a failed rally here we should be quickly stopped out. Traders should only use risk capital and small positions as the options do not see a lot of volume. Our six-week target is the $92.00 level.

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 100.00 IYF-WT OI=220 current ask $4.90
BUY PUT NOV 95.00 IYF-WS OI=260 current ask $1.75

Picked on September 13 at $ 95.76
Change since picked: + 0.00
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 20 thousand

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Hershey Co. - HSY - close: 58.21 change: -1.04 stop: 59.51

Company Description:
The Hershey Company is a leading snack food company and the largest North American manufacturer of quality chocolate and non-chocolate confectionery products. With revenues of over $4 billion and more than 13,000 employees worldwide, The Hershey Company markets such well-known brands as Hershey's, Reese's, Hershey's Kisses, Kit Kat, Almond Joy, Mounds, Jolly Rancher, Twizzlers, Ice Breakers, and Mauna Loa, as well as innovative new products such as Take 5 and Hershey's Cookies. In addition to its traditional confectionery products, Hershey offers a range of products specifically developed to address the nutritional interests of today's health-conscious consumer. These products include sugar-free Hershey's, Reese's and York candies, as well as Hershey's SmartZone bars for people seeking balanced nutrition. It also markets Hershey's cocoa, Hershey's syrup and other branded baking ingredients, toppings and beverages. (source: company press release or website)

Why We Like It:
The markets have been in rally mode the last two weeks but not so for shares of HSY. The stock has been stuck in a trading range between $57.40 and the $59.50 levels with the exponential 200-dma helping reinforce the upper boundary of resistance. Honestly, we're a little surprised. The stores have already put out their Halloween merchandise and you might tend to think that HSY would see some strength as a seasonal play. Apparently not this year - at least not yet. Today's decline looks like another failed rally from the top of its range with volume coming in above average. More aggressive traders may want to consider new put positions right here. We're going to wait for another decline under the $58.00 level. Our entry point will be $57.90. More conservative traders may want to wait for another new relative low altogether under $57.35. If triggered we'll target a move $54.00-53.50 range. Currently the bearish P&F chart points to a $51 target. We're going to use a tight stop at $59.51. More aggressive traders may want to use a stop over resistance at the $60.00 mark.

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 60.00 HSY-WL OI=1311 current ask $2.25
BUY PUT NOV 55.00 HSY-WK OI= 480 current ask $0.50

Picked on September xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/20/05 (unconfirmed)
Average Daily Volume = 760 thousand

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MBIA Inc. - MBI - close: 57.75 chg: -0.37 stop: 59.01

Company Description:
MBIA Inc., through its subsidiaries, is a leading financial guarantor and provider of specialized financial services. MBIA's innovative and cost-effective products and services meet the credit enhancement, financial and investment needs of its public and private sector clients, domestically and internationally. (source: company press release or website)

Why We Like It:
If you're a trader who likes to trade on a story then MBI might be a candidate. The insurer stated that it insured upwards of $2.88 billion in municipal bonds for what reporters are calling the "Katrina region". About $1.13 billion of that was in the New Orleans area. How much the hurricane will affect MBI is still unknown. We're adding it to the list because of its technical pattern. The stock just produced a failed rally at its simple 200-dma, which also coincides with the top of its descending channel. We're expecting this to be a quick play as we try and catch a move back down toward the bottom of the channel in the $54.00 region. Our target will be $54.25. We are using a tight stop at $59.01 to reduce our risk.

Suggested Options:
We are suggesting the October puts since we expect a relatively quick move in MBI.

BUY PUT OCT 60.00 MBI-VL OI=1656 current ask $3.30
BUY PUT OCT 55.00 MBI-VK OI=1408 current ask $0.95

Picked on September 13 at $ 57.75
Change since picked: + 0.00
Earnings Date 11/01/05 (unconfirmed)
Average Daily Volume = 1.2 million
 

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