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New Plays

New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
APA None VLO
PII    

New Calls

Apache Corp. - APA - close: 68.41 chg: +2.37 stop: 64.95

Company Description:
Apache Corporation is a large oil and gas independent with core operations in the United States, Canada, Australia, the United Kingdom North Sea and Egypt. (source: company press release or website)

Why We Like It:
Oil stocks are coming back to life again and many are looking pretty tempting as bullish candidates. The OIX and OSX oil indices look positive but we feel these are still higher-risk plays with crude oil prices still stuck in a two-month downtrend. Therefore we're going to use trigger to launch a play in APA. The stock has resistance near $69.00 and its 100-dma (68.71). We're going to suggest a trigger at $69.05 to open call positions. More conservative traders may want to wait for a move over $70.00 instead. If triggered we will target a move into the $75-76 range. The Point & Figure chart for APA is already bullish and points to a $83 target. A move over $69 will produce another P&F buy signal.

Suggested Options:
We are suggesting January calls.

BUY CALL JAN 65 APA-AM open interest= 9121 current ask $5.70
BUY CALL JAN 70 APA-AN open interest=12215 current ask $2.90
BUY CALL JAN 75 APA-AO open interest= 8506 current ask $1.25

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 3.7 million

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Polaris Ind. - PII - close: 48.47 change: +1.53 stop: 45.95

Company Description:
Polaris is a recognized leader in the snowmobile industry; and one of the largest manufacturers of ATVs in the world. Victory motorcycles, established in 1998 and representing the first all-new American-made motorcycle from a major company in nearly 60 years, are rapidly making impressive in-roads into the motorcycle cruiser marketplace. Polaris also enhances the riding experience with a complete line of Pure Polaris apparel, accessories and parts, available at Polaris dealerships. (source: company press release or website)

Why We Like It:
Shares of PII look like they have built a bottom. The stock broke through its three-month trendline of lower highs (resistance) about a week ago. Shares then spent the last several days consolidating sideways and finally broke through the 50-dma with confidence today. Short-term technicals have produced a new buy signal but conservative traders may want to be patient when considering new entries. The $50.00 mark can still act as round-number, psychological resistance and PII still has to deal with its descending 100-dma, which can also act as resistance. This is definitely a more aggressive play since we're trying to buy a bottom with a stock in a definite downtrend. It will take a move over $51 to turn its P&F chart into a new buy signal. We're going to target a run into the $54.00-55.00 range by year's end (under its simple 200-dma).

Suggested Options:
We are suggesting the January strikes even though they look new since there is no open interest. If you want more open interest you have to move out to March strikes.

BUY CALL JAN 45 PII-AI open interest= 0 current ask $4.80
BUY CALL JAN 50 PII-AJ open interest= 0 current ask $1.75
BUY CALL JAN 55 PII-AK open interest= 0 current ask $0.45

Picked on November 21 at $ 48.47
Change since picked: + 0.00
Earnings Date 01/12/06 (unconfirmed)
Average Daily Volume = 467 thousand
 

New Puts

None today.
 

New Strangles

Valero Energy - VLO - close: 99.00 chg: +0.83 stop: n/a

Company Description:
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and expected annual revenue of more than $75 billion. The company is one of the nation's largest retail operators with more than 4,700 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. The company owns and operates 18 refineries throughout the U.S., Canada and the Caribbean with a combined throughput capacity of approximately 3.3 million barrels per day, making it the largest refiner in North America. (source: company press release or website)

Why We Like It:
We do have a long-term bullish bias on the oil stocks and many stocks in the sector are now developing short-term bullish patterns. Yet there is still a lot of uncertainty about oil prices over the next few months and you can see the sideways consolidation in VLO, a major refiner, has narrowed near the $100 level. We do have a couple of bullish call plays in the oil sector in the newsletter already. We're going to add a strangle on VLO as an alternative so we can catch any move, up or down, in the oil group. We'll suggest a $98.50-100.00 entry window but the closer to $100.00 the better. VLO is due to split 2-for-1 on December 16th. That means that with the strangle play below, post split, the number of our options will double while the value should theoretically halve in price.

Suggested Options:
We are going to suggest the January strikes. As a strangle we need to buy an out of the money call and an out of the money put. At current prices this should cost us about $5.65. We'll aim for a rise to $9.50 in the strangle. Post split that target will change to $4.75 as our cost will adjust to $2.825.

BUY CALL JAN $110 VLO-AB open interest=5530 current ask $2.95
-and-
BUY PUT JAN $ 90 VLO-MR open interest=2764 current ask $2.70

Picked on November 21 at $ 99.00
Change since picked: + 0.00
Earnings Date 01/30/06 (unconfirmed)
Average Daily Volume = 10.7 million
 

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