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Call Options Plays
Put Options Plays
Strangle Options Plays
AZO SHLD AEOS
IBM   ANF
NGPS   DHI
PD    

New Calls

AutoZone - AZO - close: 86.74 chg: +0.51 stop: 84.95

Company Description:
AutoZone sells auto and light truck parts, chemicals and accessories through 3,592 AutoZone stores in the United States and 81 AutoZone stores in Mexico and also sells the ALLDATA brand automotive diagnostic and repair software. (source: company press release or website)

Why We Like It:
The auto parts industry has seen the stocks really turn higher over the last couple of weeks. Shares of AZO have helped lead the rebound and broke through its three-month trendline of lower highs in addition to resistance at its 50-dma and the $85 level. The recent bounce from the $85 level and its simple 10-dma looks like a bullish entry point to ride the rally towards the next level of resistance near $90 and its simple 200-dma. AZO's P&F chart is currently still in a sell signal but that signal is relatively close to being reversed. We are going to suggest calls here above $86 and target a move into the $89.90-90.00 range. This is a short-term play with a two-week time frame.

Suggested Options:
We are suggesting the December calls.

BUY CALL DEC 85.00 AZO-LQ open interest=10947 current ask $5.00
BUY CALL DEC 90.00 AZO-LR open interest= 1183 current ask $2.45

Picked on November 13 at $ 86.74
Change since picked: + 0.00
Earnings Date 12/08/05 (unconfirmed)
Average Daily Volume = 1.1 million

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Intl. Bus. Mach. - IBM - cls: 84.55 chg: +0.56 stop: 81.95

Company Description:
IBM is the world's largest information technology company, with 80 years of leadership in helping businesses innovate. Drawing on resources from across IBM and IBM Business Partners, IBM offers a wide range of services, solutions and technologies that enable customers, large and small, to take full advantage of the new era of e-business. (source: company press release or website)

Why We Like It:
The hardware sector has been struggling for months under a trend of lower highs if you look at the GHA hardware index. You'll also notice that the GHA is poised for a breakout just under technical resistance at the simple 200-dma. Meanwhile IBM, one of the biggest components in the GHA hardware index, has rallied back toward resistance at the $85.00 level and looks poised to breakout to new seven-month highs. The chart pattern has a lot of bullish potential and the Point & Figure chart is already in a buy signal pointing to a $105 target. However, it's worth noting that the P&F chart also shows significant resistance at the $85 mark, which coincides with the daily chart (see below). We want to position ourselves to catch any future breakout in IBM. Therefore we are suggesting a trigger to buy calls at $85.25. If we are triggered our immediate target will be the $89.90-90.00 range.

Suggested Options:
We are going to suggest both the December calls and the January calls. If you choose Decembers we have about five weeks for the play to come to fruition. If you choose Januarys you can take advantage of any Christmas/year-end rally through the end of December. We like the Januarys but the Decembers are tempting because they look cheap. Bear in mind that we'll have to pay more once IBM crosses the $85 mark.

BUY CALL DEC 80 IBM-LP open interest= 1849 current ask $5.20
BUY CALL DEC 85 IBM-LQ open interest=11783 current ask $1.55
BUY CALL DEC 90 IBM-LR open interest= 7964 current ask $0.25

-or-

BUY CALL JAN 85 IBM-AQ open interest=39055 current ask $2.55
BUY CALL JAN 90 IBM-AR open interest=33339 current ask $0.75

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/16/06 (unconfirmed)
Average Daily Volume = million

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NovAtel Inc. - NGPS - close: 29.85 chg: +1.37 stop: 27.75

Company Description:
NovAtel designs, markets and sells high-precision GPS and other positioning components and sub-systems used in a wide variety of commercial applications principally in the aviation, geomatics (surveying and mapping), mining, precision agriculture, marine and defence industries. NovAtel's solutions combine hardware, such as receivers and antennas, with software to enable its customers to fully integrate the Company's high-precision GPS technology into their respective products and systems. NovAtel, an ISO 9001 certified company, is focused on supplying core high-precision positioning technology to OEMs and system integrators who build systems for various end market applications. (source: company press release or website)

Why We Like It:
NGPS looks poised for another bullish breakout. The stock has been consolidating sideways between $22 and $30 for the past three months and that consolidation has narrowed to $28 to $30 over the past ten days. Now NGPS looks close to breaking out over resistance at the $30.00 level. The Point & Figure chart already shows the recent sell signal reversing into a buy signal that points to a $47 target. We are going to suggest a trigger to buy calls at $30.45. If triggered we'll target a move into the $35.00-36.00 range.

Suggested Options:
We are going to suggest the December calls because there aren't any Januarys available yet.

BUY CALL DEC 25.00 QAZ-LE open interest= 94 current ask $7.80
BUY CALL DEC 30.00 QAZ-LF open interest=434 current ask $2.20
BUY CALL DEC 35.00 QAZ-LG open interest=197 current ask $0.80

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 292 thousand

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Phelps Dodge - PD - cls: 130.31 chg: +4.97 stop: 123.69

Company Description:
Phelps Dodge Corp. is one of the world's leading producers of copper and molybdenum, the largest producer of molybdenum-based chemicals and continuous-cast copper rod, and among the leading producers of magnet wire and carbon black. The company and its two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries, employ approximately 15,500 people worldwide. (source: company press release or website)

Why We Like It:
The volatile shares of copper-producer PD look poised for a new leg higher. The stock had been consolidating over the past month and Friday's move was a key turning point. The stock broke out from its consolidation pattern on volume three times the daily average. Technical signals turned bullish and its MACD indicator has produced a new buy signal. The Point & Figure chart looks pretty strong with a new ascending triple-top breakout buy signal pointing to a $150 target. We are suggesting bullish positions anywhere above $127.50. Our preferred entry point would be a dip back toward $127.50-128.00 but it may not occur. Our target is the $139.50-140.00 range. Our time frame is

Suggested Options:
We are suggesting the December or January options but our preference is the Januarys.

BUY CALL DEC 125 PD-LE open interest= 941 current ask $6.60
BUY CALL DEC 130 PD-LF open interest= 713 current ask $4.70
BUY CALL DEC 135 PD-LG open interest= 533 current ask $2.60

-or-

BUY CALL JAN 125 PD-AE open interest=2330 current ask $9.50
BUY CALL JAN 130 PD-AF open interest=7657 current ask $7.50
BUY CALL JAN 135 PD-AG open interest=1771 current ask $5.60

Picked on November 13 at $130.31
Change since picked: + 0.00
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 2.7 million
 

New Puts

Sears Holding - SHLD - cls: 114.80 chg: -3.48 stop: 119.01

Why We Like It:
We are switching sides with SHLD. A week ago the stock look poised to breakout through the top of its $114-128 trading range. The breakout never materialized and now SHLD, displaying lots of relative weakness, has fallen toward the bottom of its trading range. Technical oscillators are naturally looking bearish and its MACD just produced a new sell signal. If SHLD does breakdown to a new low the next leg down could be substantial. We're going to suggest a TRIGGER at $112.99. If we are triggered we will target a decline to the $100.50-100.00 range. It would be tempting to aim for a larger move but we do not want to hold over SHLD's earnings in the first week of December. Speaking of earnings rival Wal-Mart (WMT) is due to report earnings on Monday morning and WMT's news and guidance could be a big factor in the direction SHLD moves next. We also want to suggest an alternative strategy. If SHLD does not breakdown but instead bounce from the bottom of its range (say back over $116 or 117) then nimble traders could try and play a bounce to the top of SHLD's trading range near $128.

Suggested Options:
We are suggesting December options since we plan to exit ahead of SHLD's December earnings report.

BUY PUT DEC 115 KTQ-XC open interest=3062 current ask $7.40
BUY PUT DEC 110 KTQ-XB open interest=3941 current ask $5.00
BUY PUT DEC 105 KTQ-XA open interest=2871 current ask $3.30

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 12/07/05 (unconfirmed)
Average Daily Volume = 3.2 million
 

New Strangles

Amer. Eagle Out. - AEOS - cls: 25.47 chg: +0.17 stop: n/a

Company Description:
American Eagle Outfitters is a leading lifestyle retailer that designs, markets, and sells its own brand of relaxed, casual clothing for 15 to 25 year olds, providing high-quality merchandise at affordable prices. AE's collection includes modern basics like jeans, cargo pants, and graphic Ts as well as a stylish assortment of cool accessories, outerwear and footwear. American Eagle Outfitters currently operates 793 AE stores in 50 states, the District of Columbia and Puerto Rico, and 71 AE stores in Canada. AE also operates via its Web business, www.ae.com, which offers additional sizes and styles of favorite AE merchandise. The company plans to open MARTIN + OSA, a new sportswear concept targeting 25 to 40 year old women and men, in the fall of 2006. (source: company press release or website)

Why We Like It:
The Q3 earnings parade has dwindled to just a trickle but there are still several opportunities for us to use a strangle and capture any post-earnings volatility. AEOS is one such opportunity. The company is due to report earnings on Tuesday, November 15th before the market open. That gives us one day to launch new strangle positions ahead of the report. We're going to suggest an entry window of $25.75-24.25.

Suggested Options:
We are going to suggest the January strikes for this strangle. Remember as a strangle we need to buy an out of the money call and an out of the money put option. At current prices this strangle should cost about $2.35. Try and keep your investment under $2.45. We'll aim for a rise to $4.70.

BUY CALL JAN 27.50 AQU-AY open interest=1691 current ask $1.40
-and-
BUY PUT JAN 22.50 AQU-MX open interest=1051 current ask $0.95

Picked on November 13 at $ 25.47
Change since picked: + 0.00
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 3.6 million

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Abercrombie&Fitch - ANF - close: 59.67 chg: +0.33 stop: n/a

Company Description:
The Company operated 354 Abercrombie & Fitch stores, 163 abercrombie stores, 297 Hollister Co. stores and 6 RUEHL stores at the end of fiscal October. (source: company press release or website)

Why We Like It:
ANF appears to be out doing its opponents in the retail space. The company recently released same-store sales for October that blew past analyst estimates at +31% growth. Since that report in early November the stock has been consolidating sideways as investors wait for ANF's earnings report due out next week. With ANF's report expected on Tuesday, November 15th after the closing bell that gives us two days to launch strangle positions. We're going to suggest an entry window of $59.00-61.00 but the closer to $60.00 the better!

Suggested Options:
We are going to suggest the January strikes. That way if ANF breaks out higher we can take advantage of the entire month of December. At current prices our strangle should cost about $5.15. Try and keep your investment under $5.25. We'll aim for a rise to $8.50. A similar strangle using December options would cost about $3.30.

BUY CALL JAN 65 ANF-AM open interest=1457 current ask $2.60
-and-
BUY PUT JAN 55 ANF-MK open interest= 934 current ask $2.55

Picked on November 13 at $ 59.67
Change since picked: + 0.00
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 2.7 million

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D.R.Horton - DHI - close: 32.56 chg: +0.55 stop: n/a

Company Description:
D.R. Horton, Inc., America's Builder, is the largest homebuilder in the United States, delivering more than 50,000 homes in its fiscal year ended September 30, 2005. Founded in 1978 in Fort Worth, Texas, D.R. Horton has expanded its presence to include 71 markets in 23 states in the Midwest, Mid-Atlantic, Southeast, Southwest and West regions of the United States. The Company is engaged in the construction and sale of high quality homes with sales prices ranging from $80,000 to over $900,000. D.R. Horton also provides mortgage financing and title services for homebuyers through its mortgage and title subsidiaries. (source: company press release or website)

Why We Like It:
Toll Brothers (TOL) gave the homebuilding sector a jolt this past week with some bearish news about sales expectations. That surprise from TOL could have fears rising for similar news out of DHI. Whatever DHI does report it could spark the next move in the stock price. DHI is due to report earnings on November 16th before the market open. That gives us two days to try and launch a strangle position. We're going to suggest an entry window of $32.00-33.00.

Suggested Options:
We are going to suggest January options for this strangle. At current prices this should cost about $3.15 Try and keep your investment under $3.30. We'll aim for a rise to $6.00.

BUY CALL JAN 35 DHI-AG open interest=5004 current ask $1.65
-and-
BUY PUT JAN 30 DHI-MF open interest=8646 current ask $1.50

Picked on November 13 at $ 32.56
Change since picked: + 0.00
Earnings Date 11/16/05 (confirmed)
Average Daily Volume = 3.2 million
 

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