Option Investor
New Plays

New Option Plays

Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays

New Calls

Centex Corp. - CTX - close: 73.86 chg: +1.38 stop: 71.39

Company Description:
Centex, a Fortune 250 company founded in 1950, is one of the nation's leading home building companies. Centex Homes operates in major U.S. markets in 25 states and delivered more than 33,000 homes in the United States in its most recent fiscal year ended March 31, 2005. (source: company press release or website)

Why We Like It:
It doesn't matter if you think real estate is a bubble about to burst, has already burst, or is still in a bull market. There is no denying the recent strength in shares of CTX. The stock has been a relative strength leader in a sector that in the last few weeks has broken out from a three-month bearish consolidation. We like CTX as a bullish candidate because the stock has just begun to bounce from the bottom of its rising channel. We can enter here with a relatively tight stop to limit our risk. We would suggest calls with CTX above $72.50. Our six-week target is the $78.50-80.00 range. The Point & Figure chart has a triple-top breakout buy signal pointing to a $95 target.

Suggested Options:
We are suggesting the January calls. We do not want to hold over the late January earnings report.

BUY CALL JAN 70 CTX-AN open interest=2532 current ask $6.10
BUY CALL JAN 75 CTX-AO open interest=3588 current ask $3.10

Picked on December 04 at $ 73.86
Change since picked: + 0.00
Earnings Date 01/24/06 (unconfirmed)
Average Daily Volume = 2.6 million

New Puts

Magna Int. - MGA - close: 68.14 chg: -0.90 stop: 70.31

Company Description:
Magna, the most diversified automotive supplier in the world, designs, develops and manufactures automotive systems, assemblies, modules and components, and engineers and assembles complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks in North America, Europe, Asia and South America. Our capabilities include the design, engineering, testing and manufacture of automotive interior and closure systems; metal body and structural systems; exterior and interior mirror and engineered glass systems; exterior systems, including front and rear end modules, plastic body panels, exterior trim and other systems; various powertrain and drivetrain systems; as well as complete vehicle engineering and assembly. (source: company press release or website)

Why We Like It:
Investors are worried about the auto industry. Makers like GM and Ford have seen the stocks in addition to parts suppliers like LEA and MGA. It doesn't help that Wall Street is worried over a potential bankruptcy from Delphi. We like MGA as a put candidate because its oversold bounce from the October lows has stalled under the descending trendline of resistance and its 50-dma and 200-dma. Technicals are bearish with its MACD producing a new sell signal. We are going to suggest buying puts here under $69. More conservative traders might want to wait for a little more confirmation that the next leg lower has begun by waiting for a decline under $67. The daily chart does show short-term support near $66 but we believe MGA can sink toward the $63.00-62 range before January options expire. We'll put our stop at $70.31, just over the simple 200-dma.

Suggested Options:
We are going to suggest the January puts.

BUY PUT JAN 70 YVG-MN open interest= 96 current ask $3.30

Picked on December 04 at $ 68.14
Change since picked: + 0.00
Earnings Date 02/07/06 (unconfirmed)
Average Daily Volume = 318 thousand

New Strangles

Blue Coat Sys. - BCSI - cls: 45.43 chg: -0.56 stop: n/a

Company Description:
Blue Coat helps organizations make the Web safe and productive for business. Blue Coat proxy appliances provide visibility and control of Web communications to protect against risks from spyware, Web viruses, inappropriate Web surfing, instant messaging (IM), video streaming and peer- to-peer (P2P) file sharing -- while actually improving Web performance. Trusted by many of the world's largest organizations, Blue Coat has shipped more than 25,000 proxy appliances. Blue Coat is headquartered in Sunnyvale, California. (source: company press release or website)

Why We Like It:
Shares of BCSI have been stuck in a very narrow, sideways consolidation over the past nine sessions and we suspect that a breakout (either direction) is nearing. The stock has been a big winner with a rally from its May lows. Yet last month BCSI displayed some volatility. The stock gapped lower after posting earnings that beat estimates by 2 cents but the company issued a mixed earnings forecast. A week later BCSI gapped higher after an analyst upgraded the stock to a "strong buy". Shares have been range bound ever since. BCSI has an analyst meeting coming up on December 8th and this might provide the needed catalyst to jar the stock out of its trading range. With the current strangle strategy proposed we're betting that BCSI will move at least eight dollars in the next seven weeks. We're going to suggest a $46-44 entry window but the closer to $45.00 the better.

Suggested Options:
We'd like to buy February strikes but there aren't any available yet. That leaves us with January or April strikes and the Aprils are too expensive for us. As a strangle we want to buy an out of the money call and an out of the money put. At current prices our cost would be $3.25. We'll aim for a rise to $5.50.

BUY CALL JAN 50 IYU-AJ open interest=575 current ask $1.90
BUY PUT JAN 40 IYU-MH open interest=271 current ask $1.35

Picked on December 04 at $ 45.43
Change since picked: + 0.00
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 416 thousand

New Play Archives