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FODRSNone
GCIEXPD 
SIGI  

New Calls

Fortune Brands - FO - close: 77.95 change: +0.55 stop: 76.45

Company Description:
Fortune Brands, Inc. is a leading consumer brands company with annual sales exceeding $7 billion. Its operating companies have premier brands and leading market positions in home and hardware products, spirits and wine, and golf equipment. Home and hardware brands include Moen faucets, Aristokraft, Omega, Diamond and Schrock cabinets, Therma-Tru door systems, Master Lock padlocks and Waterloo tool storage sold by units of Fortune Brands Home & Hardware LLC. Jim Beam Brands Worldwide, Inc. is the company's spirits and wine business. Major spirits and wine brands include Jim Beam and Maker's Mark bourbons, Sauza tequila, Canadian Club whisky, Courvoisier cognac, DeKuyper cordials, Starbucks(TM) Coffee Liqueur, Laphroaig single malt Scotch and Clos du Bois and Geyser Peak wines. Acushnet Company's golf brands include Titleist, Cobra and FootJoy. (source: company press release or website)

Why We Like It:
Last year, 2005, was a rocky year for FO. The stock rallied from $75 to $96 from January to July and by late October it was trading near $74. If you look closely at its daily chart over the last couple of months you'll see a pennant or wedge-like consolidation pattern of higher lows and lower highs. We suspect that FO will breakout to the upside. The Point & Figure chart supports this vision with an upward target near $90. However, a true pennant is a neutral consolidation pattern and the stock could breakout either way. We're listing FO as a call candidate in the newsletter but we have two triggers and it could end up being a put play. If FO breaks out of its pattern and moves higher then we want to use a trigger at $78.65 to buy calls. More conservative traders may want to wait for a new four-week high above $79.30 or even wait for a move over $80 and its 100-dma since both levels ($80.00 and 100-dma) could offer overhead resistance. If triggered at $78.65 then our short-term target will be the $83.00-84.00 range. Our alternate entry will be at $76.35. If FO breaks down and hits our trigger at $76.35 then we want to buy puts and we'll target a decline 72.50-72.00 range. If triggered to the downside we'll use a stop loss at $78.55. We only have about three weeks before FO is expected to report earnings so we're trying to keep the targets reasonable. We do not want to hold over the earnings report. It is possible that FO could produce a very volatile session and hit both our triggers in the same day thus creating two positions. If that's the case we'll see where FO closes and adjust our strategy and probably close one side at a loss. Traders without the ability to monitor their positions during the day may want to just wait for the breakout to occur before initiating a position.

If you want to consider more alternative look into a strangle play. Aggressive players could buy a strangle using February options with an $80 call and a $75 put for about $2.00. A March strangle at the same strikes would cost about $7.00.

Suggested Options:
If FO trades at $78.65 buy calls. The following calls are for quick reference. We're not suggesting any one strike.

BUY CALL FEB 75 FO-BO open interest= 10 current ask $3.90
BUY CALL FEB 80 FO-BP open interest=280 current ask $1.10

If FO trades at $76.35 buy puts. We're not suggesting any one specific strike.

BUY PUT FEB 80 FO-NP open interest= 67 current ask $3.20
BUY PUT FEB 75 FO-NO open interest=337 current ask $0.90

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/03/06 (unconfirmed)
Average Daily Volume = 803 thousand

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Gannett Co - GCI - close: 64.28 change: +1.26 stop: 61.99

Company Description:
Gannett Co., Inc. is a leading international news and information company that publishes 91 daily newspapers in the USA, including USA TODAY, the nation's largest-selling daily newspaper. The company also owns more than 1,000 non-daily publications in the USA and USA WEEKEND, a weekly newspaper magazine. Gannett subsidiary Newsquest is the United Kingdom's second largest regional newspaper company. Newsquest publishes more than 300 titles, including 17 daily newspapers, and a network of prize-winning Web sites. Gannett also operates 21 television stations in the United States and is an Internet leader with sites sponsored by its TV stations and newspapers including USATODAY.com, one of the most popular news sites on the Web. (source: company press release or website)

Why We Like It:
Shares of GCI are extremely oversold after a two-year decline. The action over the last four weeks suggests that GCI has now produced an intermediate bottom. The breakout over resistance near $62.00 and its simple 50-dma is bullish and many of the technical indicators remain bullish following the January breakout. We see the Thursday-Friday bounce from the 50-dma as a new bullish entry point and would suggest call positions here. More conservative traders may want to wait for GCI to clear potential resistance at the $65.00 level and its 100-dma (near $65) before initiating call positions. Our target is going to be the $68.50-69.00 range. However, we do not want to hold any positions over the January 27th earnings report.

Suggested Options:
We are suggesting February calls since we plan to exit ahead of the late January earnings report. We are not suggesting any one strike. This list of calls is for reference.

BUY CALL FEB 60 GCI-BL open interest= 10 current ask $5.00
BUY CALL FEB 65 GCI-BM open interest=165 current ask $1.50

Picked on January 15 at $ 64.28
Change since picked: + 0.00
Earnings Date 01/27/06 (confirmed)
Average Daily Volume = 1.4 million

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Selective Ins. - SIGI - close: 55.19 chg: +1.11 stop: 53.79

Company Description:
Selective Insurance Group, Inc., headquartered in Branchville, New Jersey, is a holding company for six property and casualty insurance companies that offer primary and alternative market insurance for commercial and personal risks, and flood insurance policy, administration and claim services. The insurance companies are rated "A+" (Superior) by A.M. Best. Through other subsidiaries, the company offers claim management services; human resources administration services; and risk management products and services. (source: company press release or website)

Why We Like It:
SIGI soared to new all-time highs back in late October and early November. The stock has since spent the last several weeks consolidating those gains. The trading action over the last week or so suggests that the consolidation may be coming to an end. Short-term technical oscillators have turned bullish and its daily MACD indicator is flirting with a new buy signal. We want to catch a breakout over resistance at $56.00 and its simple 50-dma (55.75). Our trigger to buy calls will be $56.05. If triggered our target will be the $59.50-60.00 range. We only have a couple of weeks for the play to perform since we don't want to hold a position over the end of January earnings report. FYI: SIGI might announce a stock split with its earnings report. The company last split its stock in December 1997 in the $50-52 region.

Suggested Options:
Traders can choose the February or March options. Given our time frame we'd prefer the February strikes but the option volume is very low so we're suggesting March strikes.

BUY CALL MAR 55 IVU-CK open interest=225 current ask $2.85
BUY CALL MAR 60 IVU-CL open interest=188 current ask $0.90

BUY CALL FEB 55 IVU-BK open interest= 18 current ask $2.10

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/31/06 (unconfirmed)
Average Daily Volume = 163 thousand
 

New Puts

DRS Tech. - DRS - close: 48.80 change: -1.35 stop: 51.01

Company Description:
DRS Technologies, headquartered in Parsippany, New Jersey, provides leading edge products and services to defense, government intelligence and commercial customers. Focused on defense technology, DRS develops and manufactures a broad range of mission critical systems. The company employs 6,000 people worldwide. (source: company press release or website)

Why We Like It:
After a very impressive two-year rally it looks like shares of defense contractor DRS are finally headed for some profit taking. Actually the stock has been consolidating in a choppy, sideways fashion for the last five months. Friday's decline marks the fourth breakdown attempt at the stock's rising 200-dma(s) in the last four and a half months. If you study the daily chart you'll notice that the previous three breakdown attempts all rebounded during the same session. Yet this last Friday did not see much of a rebound and that suggests that the selling pressure might finally over come the dip buyers. We are going to suggest a trigger at $47.95 to catch a breakdown. If triggered we'll target a quick decline into the $45.00-44.00 range. More aggressive traders may want to use a lower target. We do not want to hold over the February earnings report.

Suggested Options:
We are suggesting February puts. If you want more option volume consider using March puts.

BUY PUT FEB 50 DRS-NU open interest=980 current ask $2.75
BUY PUT FEB 45 DRS-NI open interest= 90 current ask $0.85

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/09/06 (unconfirmed)
Average Daily Volume = 275 thousand

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Expeditors Intl. - EXPD - cls: 66.87 change: +0.65 stop: 68.55

Company Description:
Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 164 full-service offices, 54 satellite locations and 7 international service centers located on six continents linked into a seamless worldwide network through an integrated information management system. Services include air and ocean freight forwarding, vendor consolidation, customs clearance, marine insurance, distribution and other value added international logistics services. (source: company press release or website)

Why We Like It:
January, especially the second half of the month, is not known for being very kind to the transportation stocks. Therefore it does not come as much of a surprise to see that the sector has not participated in the market's strength over the past couple of weeks. The Dow Transportation index's upward momentum has stalled and it looks poised to breakdown under its 50-dma. Meanwhile shares of EXPD have already broken down under its 50-dma. Actually EXPD has been consolidating for the past seven weeks. The stock soared last fall and now it's slowly grinding lower against support at the $66.00 level. If the market shows any weakness in the next couple of weeks it could be the catalyst for EXPD to breakdown. We want to catch a breakdown with a trigger to buy puts at $65.80. The P&F chart is bearish and points to a $61 target. We agree and will target a decline into the $61.00-60.00 range. We do not want to hold any positions over the mid February earnings report.

Suggested Options:
We are suggesting February puts.

BUY PUT FEB 70 URP-NN open interest=274 current ask $6.50
BUY PUT FEB 65 URP-NM open interest=220 current ask $1.65

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/14/06 (unconfirmed)
Average Daily Volume = 972 thousand
 

New Strangles

None today.
 

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