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Call Options Plays
Put Options Plays
Strangle Options Plays
None None DNA
    ITT
    KOSP
    PFCB

New Calls

None today.
 

New Puts

None today.
 

New Strangles

Genentech - DNA - close: 84.83 chg: -0.17 stop: n/a

Company Description:
Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. A considerable number of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes multiple biotechnology products directly in the United States and licenses several additional products to other companies. The company has headquarters in South San Francisco, Calif. (source: company press release or website)

Why We Like It:
The BTK biotech index has been producing a lot of volatility lately. In the last four weeks the BTK index has produced both a bullish buy signal and a bearish sell signal and both were quickly reversed. This state of confusion has left shares of DNA narrowing into a neutral pattern. You could argue DNA is bearish given the breakdown under the $90 level and its 50-dma. You could argue bullish given the short-term double-bottom from support near $80. We're going to suggest a strangle to capture the next move in the stock. This way we don't care what direction it goes as long as the move is significant!

Suggested Options:
We are going to suggest a strangle using December options although one could certainly launch a strangle using November strikes. We like the Decembers because it gives us more time. Investors using a strangle need to buy both an OTM call and an OTM put.

BUY CALL DEC 95.00 DWN-LS OI=6346 current ask $1.15
-and-
BUY PUT DEC 75.00 DWN-XO OI=3621 current ask $1.25

This should put our total investment around $1.40. Try not to pay more than $1.60-1.70.

*We would not initiate a new strangle position if DNA gaps open tomorrow outside the $84.50-85.50 range. We plan to exit if either option trades into the $2.80-3.00 range (100% profit).

If you want to try November strikes we would consider the November $90 call and the November $80 put.

Picked on October 20 at $ 84.83
Change since picked: + 0.00
Earnings Date 10/10/05 (confirmed)
Average Daily Volume = 3.9 million

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ITT Industries - ITT - close: 109.96 chg: -1.16 stop: n/a

Company Description:
ITT Industries, Inc. supplies advanced technology products and services in key markets including: electronic interconnects and switches; defense communication, opto-electronics, information technology and services; fluid and water management and other specialty products. Headquartered in White Plains, NY, the company generated $6.8 billion in 2004 sales. (source: company press release or website)

Why We Like It:
ITT looks like another attractive strangle candidate. The stock's upward momentum has stalled with a bearish double-top pattern near $115.00. Yet even though the stock has broken below its five-month bullish trendline of support there has not been a lot of bearish follow through. Instead shares have been consolidating sideways the last few days. We're going to suggest a strangle and expect the October 27th earnings report (before the market open) to be the catalyst for ITT's next big move.

Suggested Options:
We are going to suggest the November strikes although more conservative traders could try January strikes.

BUY CALL NOV $115.00 ITT-KC OI=273 current ask $1.20
-and-
BUY PUT NOV $105.00 ITT-WA OI=524 current ask $1.35

This puts our total investment around $2.55. Try not to pay more than $3.00. We would not initiate new positions if ITT trades outside the $109-111 range. We considered a $120c/100p strangle but there aren't any $100 puts available for November. We'll plan to exit/sell if either option trades in the $4.50-5.00 range.

Picked on October 20 at $109.96
Change since picked: + 0.00
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 532 thousand

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Kos Pharma - KOSP - close: 59.80 chg: -1.64 stop: n/a

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, CardizemLA 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:
We seriously considered adding KOSP to the play list as just a put play. The stock peaked in July-August with a double-top pattern and has been sliding lower ever since. The DRG drug index doesn't look healthy (thanks to Pfizer today) so KOSP's decline could easily continue. However, we decided to make this a strangle since the pull back in KOSP has stalled at the 38.2% Fibonacci retracement level of its March-August rally. We will suggest a strangle here and expect the early November earnings to produce additional volatility. We would not initiate new strangles once KOSP traded outside the $59.25-60.75 range.

Suggested Options:
We are suggesting the November options for this strangle.

BUY CALL NOV 65.00 KQW-KM OI=987 current ask $1.50
-and-
BUY PUT NOV 55.00 KQW-WK OI=849 current ask $1.40

This puts our investment around $2.90. Try not to pay more than 3.00-3.10 if you can help it. Our time frame is four weeks. We'll plan to sell if either option hits $5.00 or more.

Picked on October 20 at $ 59.80
Change since picked: + 0.00
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 460 thousand

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P.F.Chang's - PFCB - close: 49.99 chg: -1.07 stop: n/a

Company Description:
P.F. Chang's China Bistro, Inc. owns and operates two restaurant concepts in the Asian niche. P.F. Chang's China Bistro combines high-quality, traditional Chinese cuisine with attentive service in a sophisticated contemporary bistro setting. Pei Wei Asian Diner offers a modest menu of freshly prepared Asian cuisine served in a relaxed, warm environment offering attentive counter service and take-out flexibility. (source: company press release or website)

Why We Like It:
Shares of PFCB have been churning sideways in a $4.00 range (48-52) since the company announced a mixed same-store sales picture back in early October. Currently the stock is trading right in the middle of its range and we expect that the earnings report next week (Wednesday, October 26th before the market open) will be the catalyst to push PFCB out of this trading range.

Suggested Options:
We are going to suggest the November strikes.

BUY CALL NOV 55.00 HUO-KK OI=191 current ask $0.70
-and-
BUY PUT NOV 45.00 HUO-WI OI=655 current ask $0.80

This will put our investment around $1.50. Try to stay under $1.75. We're going to plan on exiting/selling this position if either option trades in the $2.50-3.00 range.

Picked on October 20 at $ 49.99
Change since picked: + 0.00
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 912 thousand
 

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