Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
None None AVID
    IRF
    MSFT

New Calls

None today.
 

New Puts

None today.
 

New Strangles

Avid Tech. - AVID - close: 39.56 chg: -0.32 stop: n/a

Company Description:
Avid Technology, Inc. is the world leader in digital nonlinear media creation, management, and distribution solutions, enabling film, video, audio, animation, games, and broadcast professionals to work more efficiently, productively, and creatively. (source: company press release or website)

Why We Like It:
It is earnings season so we want to take advantage of the volatility that earnings reports tend to produce. Therefore we're adding a few more strangles to the play list. AVID is up first. The stock does have the necessary volatility but that volatility has narrowed recently as the company's earnings report approaches. We would only suggest strangle positions with AVID trading in the $39.50-40.50 range. The company is due to report earnings after the closing bell on Thursday so tomorrow and Thursday are our only chances to initiate a position before they announce.

Suggested Options:
We like the December options for a strangle. At current prices this is about $2.25. Try and keep it under $2.40. We're looking for a target of $4.50-5.00 on either side.

BUY CALL DEC 45.00 AQI-LI OI=1836 current ask $1.10
-and-
BUY PUT DEC 35.00 AQI-XG OI=1091 current ask $1.15

Picked on October 25 at $ 39.56
Change since picked: + 0.00
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 929 thousand

---

Intl Rectifier - IRF - close: 34.95 chg: -0.25 stop: n/a

Company Description:
International Rectifier is a world leader in power management technology. IR's analog and mixed signal ICs, advanced circuit devices, integrated power systems and components enable high performance computing and reduce energy waste from motors, the world's single largest consumer of electricity. Leading manufacturers of computers, energy efficient appliances, lighting, automobiles, satellites, aircraft and defense systems rely on IR's power management benchmarks to power their next generation products. (source: company press release or website)

Why We Like It:
Semiconductor maker IRF issued an earnings warning a couple of weeks ago that sent the stock reeling. Since then shares of IRF have been consolidating sideways in a narrow range. That range has narrowed even further as investors wait for the company's earnings report, which is due out on Thursday, October 27th after the closing bell. That gives us two days to initiate a strangle position on the stock. We would only want to launch positions with IRF in the 34.50-35.50 window.

Suggested Options:
We like the December options for this strangle. At these prices our investment should be $1.20. Try and keep it under $1.40 if possible. We'll look for a rise to $2.40 as our target.

BUY CALL DEC 40.00 IRF-LH OI= 417 current ask $0.60
-and-
BUY PUT DEC 30.00 IRF-XF OI= 85 current ask $0.60

Picked on October 25 at $ 34.95
Change since picked: + 0.00
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 1.5 million

---

Microsoft - MSFT - close: 25.03 change: -0.07 stop: n/a

Company Description:
Founded in 1975, Microsoft is the worldwide leader in software, services and solutions that help people and businesses realize their full potential. (source: company press release or website)

Why We Like It:
MSFT almost doesn't move enough these days to make it a worthwhile options play if you are playing just calls or just puts. We even hesitate to list this strangle strategy but the prices look tempting. The company is due to report earnings after the bell on Thursday. That gives us two days to initiate a strangle position. We would try and use a $25.25-24.75 window to open any strangles. Some traders might want to consider a December or January straddle play but your investment will be a lot higher. (FYI: a straddle involves buying both a call and a put at the same strike price - in this case at the $25.00 strike. You don't care which direction the stock moves as long as the move is big enough to put one side of your investment into profitable territory.)

Suggested Options:
This is a strangle so we're suggesting traders buy a December call and a December put. At these prices our investment would be $0.30. We'll aim for an $0.80-0.90 target.

BUY CALL DEC $27.50 MSQ-LY OI= 672 current ask $0.15
-and-
BUY PUT DEC $22.50 MSQ-XX OI= 0 current ask $0.15

Picked on October 25 at $ 25.03
Change since picked: + 0.00
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 64 million
 

New Play Archives