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New Plays

New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
GS None CME
HOV   STR
WLT    

New Calls

Goldman Sachs - GS - close: 131.58 chg: 1.17 stop: 124.99

Company Description:
Goldman Sachs is a leading global investment banking, securities and investment management firm. (source: company press release or website)

Why We Like It:
The broker-dealers have been a huge pillar of strength in the market's rally. One of the stocks leading that charge higher is GS. On Friday GS broke out from a short-term bull-flag pattern and closed near five-year highs. The Point & Figure chart is pretty bullish with a suggested $177 price target. We believe that GS will continue to rally. The stock, actually the group, has a history or rising strongly into their earnings reports. GS is due to report earnings in mid December. That gives us about four weeks. We would suggest call positions with GS over the $130 level but more conservative traders might want to see a new high over $132 first just to confirm the move. Our target will be the $139.00-140.00 range.

Suggested Options:
Aggressive traders could use December strikes. We're going to suggest the January strikes. We do not plan on holding over GS' earnings report.

BUY CALL JAN 130 GS-AF open interest=9560 current ask $5.90
BUY CALL JAN 135 GS-AG open interest=2406 current ask $3.00

Picked on November 20 at $131.58
Change since picked: 0.00
Earnings Date 12/15/05 (unconfirmed)
Average Daily Volume = 3.6 million

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Hovnanian - HOV - close: 48.36 change: 0.35 stop: 44.45

Company Description:
Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, Chairman, is headquartered in Red Bank, New Jersey. The Company is one of the nation's largest homebuilders with operations in Arizona, California, Delaware, Florida, Illinois, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. The Company's homes are marketed and sold under the trade names K. Hovnanian Homes, Goodman Homes, Matzel & Mumford, Diamond Homes, Westminster Homes, Forecast Homes, Parkside Homes, Brighton Homes, Parkwood Builders, Great Western Homes, Windward Homes, Cambridge Homes, Town & Country Homes, Oster Homes and First Home Builders of Florida. As the developer of K. Hovnanian's Four Seasons communities, the Company is also one of the nation's largest builders of active adult homes. (source: company press release or website)

Why We Like It:
HOV is another stock that we think might rally into its earnings report. The homebuilding sector shrugged off some negative news last week with worse than expected housing starts. The DJUSHB home construction index is currently challenging resistance at its 200-dma after breaking out over its 50-dma and its three-month trendline of lower highs. Shares of HOV have likewise broken out over its 50-dma and the recent bounce has produced a new Point & Figure buy signal that points to a $60 target. The company is expected (unconfirmed) to report earnings on December 7th. That gives us about two and a half weeks to ride HOV into its earnings report. We are going to suggest a trigger at $49.25 to open the play. Until HOV trades at or above this level we'll sit out. More conservative traders may want to wait for a move over $50.00 before initiating positions. Our target is the $54.50-55.00 range just under technical resistance at its 200-dma. We do not want to hold over the company's earnings report.

Suggested Options:
We do plan to exit ahead of HOV's earnings report in December so we could use the December strikes. However, we prefer the January strikes.

BUY CALL JAN 45.00 HOV-AI open interest= 792 current ask $5.70
BUY CALL JAN 50.00 HOV-AJ open interest=1064 current ask $2.70
BUY CALL JAN 55.00 HOV-AK open interest=1947 current ask $1.05

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: 0.00
Earnings Date 12/07/05 (unconfirmed)
Average Daily Volume = 1.5 million

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Walter Inds. - WLT - close: 51.50 change: 1.93 stop: 45.95

Company Description:
Walter Industries, Inc. is a diversified company with annual revenues of $2.7 billion. The Company is a leader in water infrastructure, flow control and water transmission products, with respected brand names such as Mueller, U.S. Pipe, James Jones, Hersey Meters, Henry Pratt and Anvil. The Company is also a significant producer of high-quality metallurgical coal and natural gas for worldwide markets and is a leader in affordable homebuilding and financing. Based in Tampa, Fla., the Company employs approximately 10,600 people. (source: company press release or website)

Why We Like It:
WLT is another construction play but we're adding it to the list as a technical breakout play. The stock has been rallying higher this past week on rising volume and broken through major resistance at the $50.00 mark on Friday. Friday's breakout helped produce a new bullish-triangle breakout buy signal on WLT's Point & Figure chart that now points to a $64 target. We would suggest bullish call positions with the stock above $50. Patient traders can wait for a dip back to the $50.00 level as a new entry point since it's common for a stock to pull back and retest broken resistance as new support. Our target is the $57-58 range by December 31st. More conservative traders can aim for an exit near $55.

Suggested Options:
We are suggesting the January calls.

BUY CALL JAN 50 WLT-AJ open interest=2625 current ask $4.30
BUY CALL JAN 55 WLT-AK open interest=3463 current ask $1.95

Picked on November 20 at $ 51.50
Change since picked: 0.00
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 927 thousand
 

New Puts

None today.
 

New Strangles

Chicago Merc. Exchg. - CME - cls: 375.90 chg: -2.35 stop: n/a

Company Description:
Chicago Mercantile Exchange Inc. is the largest and most diverse futures exchange in the world. As an international marketplace, CME brings together buyers and sellers on CME Globex electronic trading platform and on its trading floors. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moved about $1.4 billion per day in settlement payments in the first three quarters of 2005 and managed $43.8 billion in collateral deposits at September 30, 2005, including $3.8 billion in deposits for non-CME products. (source: company press release or website)

Why We Like It:
High-flying shares of CME have pulled back a bit after hitting new all-time highs near $395. Currently the stock is throwing off some mixed signals with some indicators giving sell signals while others, like the Point & Figure chart, are giving buy signals. Speaking of the P&F chart the buy signal points to a $496 price target. We're going to suggest a strangle to try and capture any future volatility in the stock price. However, considering the high prices of these options, traders should consider this is an aggressive, high-risk play. We'll suggest a $373-377 entry window.

Suggested Options:
This is a strangle so traders need to buy an out of the money call and an out of the money put. We liked the March options, which gave us an option to hold over CME's late January earnings report. Unfortunately, they just look too expensive. We're going to suggest the January strikes. At current prices this position costs about $26.70. We're going to target a 50% rise in value to $40.00. This equates to approximately a $50 move in the next nine-weeks.

BUY CALL JAN 400 CMJ-AK open interest=763 current ask $14.40
-and-
BUY PUT JAN 350 CMJ-MA open interest=863 current ask $12.30

Picked on November 20 at $375.90
Change since picked: 0.00
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 879 thousand

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Questar Corp. - STR - close: 76.25 chg: -0.80 stop: n/a

Company Description:
Questar Corp. is a natural gas-focused energy company with an enterprise value of $7.7 billion. Questar finds, develops, produces, gathers, processes, transports and distributes natural gas. (source: company press release or website)

Why We Like It:
Natural gas prices may have fallen the last couple of days but they have been pretty resistant to profit taking for most of November. Analysts are worried that a cold winter will push prices significantly higher thus investors are reluctant to hit the sell button. Worries of a natural gas shortage, which naturally push prices higher, are a real threat with still a large chunk of America's natural gas production still offline in the Gulf of Mexico. If prices go up or down then we'd expect STR to follow suit. Yet there is still a chance that even if gas prices go up that STR could see profit taking before year-end since the stock is such a big winner for the year thus far. To take advantage of the recent sideways consolidation and this end-of-year uncertainty we're suggesting a strangle play. We'll suggest a $75.50-77.00 entry window since the stock seems to have short-term support near $75.50.

Suggested Options:
We are going to suggest January strikes for this strangle. At current prices this should cost about $5.10 We'll aim for a rise in value to $9.50 or more. This is not a perfect entry point so try and balance the amount of capital you have on both sides of the strangle, unless you have a particular bias.

BUY CALL JAN 80 STR-AP open interest= 479 current ask $3.10
-and-
BUY PUT JAN 70 STR-MN open interest= 372 current ask $2.00

Picked on November 20 at $ 76.25
Change since picked: 0.00
Earnings Date 01/26/05 (unconfirmed)
Average Daily Volume = 716 thousand
 

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