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WYNN BBH RYL
  ESRX  
  SHLD  

New Calls

Wynn Resorts - WYNN - close: 58.78 change: +3.29 stop: 54.99

Company Description:
Wynn Resorts is traded on the NASDAQ stock exchange under the ticker symbol WYNN and, since December 2004, it has been part of the NASDAQ-100 Index. Wynn Las Vegas, a $2.7 billion luxury hotel and destination casino resort located on the Las Vegas Strip, opened to the public on April 28, 2005. Wynn Las Vegas features 2,716 luxurious guest rooms and suites; an 111,000 square foot casino; 22 food and beverage outlets; an on-site 18-hole golf course; approximately 223,000 square feet of meeting space; an on-site Ferrari and Maserati dealership; and approximately 76,000 square feet of retail space. (source: company press release or website)

Why We Like It:
It's nice to see some relative strength on a day like Friday. While the rest of the market was sliding lower shares of WYNN added 5.9% on above average volume. The move was sparked by Citigroup who initiated coverage on WYNN with a "buy" rating. The shorts panicked and pushed shares higher. The latest data puts short interest at 13% of WYNN's 99.5 million-share float. We believe that WYNN may have more upside ahead. A recent news article reported that gambling revenues for casinos on the Las Vegas Strip were up almost 24% in November. Since WYNN Las Vegas is the new kid on the block we suspect they're bringing in a good chunk of that revenue and might be out doing their peers. Technically we like the bounce from its rising 50-dma and the $55.00 level and the P&F chart points to a $72 target. We are willing to buy calls here above $58.00. More conservative traders may want to wait for a move over $60.00 or the November high at 61.50 before initiating positions. We're going to target a rally into the 64.75-65.00 range. We do not want to hold over the February earnings report.

Suggested Options:
We are suggesting the February calls since we plan to exit ahead of the February earnings report.

BUY CALL FEB 55 UWY-BK open interest= 391 current ask $5.20
BUY CALL FEB 60 UWY-BL open interest=1574 current ask $2.05
BUY CALL FEB 65 UWY-BM open interest= 868 current ask $0.65

Picked on January 22 at $ 58.78
Change since picked: + 0.00
Earnings Date 02/09/06 (unconfirmed)
Average Daily Volume = 1.1 million

New Puts

Biotech HOLDRs - BBH - close: 195.78 chg: -4.94 stop: 201.55

Company Description:
HOLDRS are trustissued receipts that represent your beneficial ownership of a specified group of stocks. HOLDRS allow you to benefit from the ownership of the stocks in a particular industry, sector or group. (source: company press release or website)

Why We Like It:
There seems to be a bearish divergence between the BTK biotech index, which is still trading near multi-year highs and the BBH biotech holders that peaked back in November. Now after several weeks of lower highs it looks like the BBH is breaking down for a new leg lower. The HOLDR has produced its third failed rally near $201.50 in the last three days and closed under its simple 100-dma again. Volume was way above average on Friday's sell-off. We would suggest buying puts here with the BBH under $196 although another failed rally near $200 would work too. Our target is going to be the rising 200-dma (currently at 184.90) but we'll use a target range of $187.00-185.00 to exit. The biggest risk we see to this play is Amgen (AMGN). AMGN is one of the biggest components in the BBH HOLDR and the company is due to report earnings on January 26th. One of the great things about the BBH is we're not so vulnerable to one company's ups and downs but AMGN is a leader in the group and how investors respond to their earnings will certainly have an impact on the BBH. More conservative players may want to wait until after AMGN reports before considering plays in the BBH.

Suggested Options:
We are suggesting the February puts.

BUY PUT FEB 200 GBZ-NT open interest=395 current ask $6.80
BUY PUT FEB 195 GBZ-NS open interest=772 current ask $4.20
BUY PUT FEB 190 GBZ-NR open interest=472 current ask $2.45

Picked on January 20 at $195.78
Change since picked: + 0.00
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 539 thousand

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Express Scripts - ESRX - close: 86.10 chg: -2.91 stop: 90.01

Company Description:
Express Scripts provides integrated PBM services, including network- pharmacy claims processing, home delivery services, benefit-design consultation, drug-utilization review, formulary management, disease management, and medical- and drug-data analysis services. The Company also distributes a full range of injectable and infusion biopharmaceutical products directly to patients or their physicians, and provides extensive cost- management and patient-care services. (source: company press release or website)

Why We Like It:
ESRX is a high-flying drug stock that turned in an amazing year for 2005. Now it looks like the upward momentum has hit a wall with resistance in the $90.00-90.75 range. The stock has failed to breakout above this level multiple times in the last two months. Short-term technicals are bearish given Friday's failed rally at the $90.00 level. If the market continues to slid we expect to see some profit taking in ESRX. We are going to suggest a trigger under technical support at the 50-dma. Our trigger will be $84.95. If triggered we'll target a decline to the rising 100-dma (currently 74.28). We will be adjusting our target to account for the rising 100-dma. At the moment we'll use an exit zone of $77.00-75.00.

Suggested Options:
We are going to suggest the February puts. As with all of our plays the list of options in our suggested options section is merely for reference. You the individual trader need to choose which one strike price fits your trading style and risk. If you're the patient type we'd wait to see if March options become available some time this week and trade those instead of Februarys.

BUY PUT FEB 90 XTQ-NR open interest=1995 current ask $5.90
BUY PUT FEB 85 XTQ-NQ open interest=6282 current ask $2.90
BUY PUT FEB 80 XTQ-NP open interest=1789 current ask $1.45

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/22/06 (confirmed)
Average Daily Volume = 2.1 million

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Sears Holding - SHLD - close: 120.76 chg: -2.49 stop: 124.05

Company Description:
Sears, Roebuck and Co., a wholly owned subsidiary of Sears Holdings Corporation, is a leading broadline retailer providing merchandise and related services. Sears, Roebuck offers its wide range of home merchandise, apparel and automotive products and services through more than 2,400 Sears-branded and affiliated stores in the United States and Canada, which includes approximately 926 full-line and 1,100 specialty stores in the U.S. Sears, Roebuck also offers a variety of merchandise and services through sears.com, landsend.com, and specialty catalogs. Sears, Roebuck offers consumers leading proprietary brands including Kenmore, Craftsman, DieHard and Lands' End -- among the most trusted and preferred brands in the U.S. The company is the nation's largest provider of home services, with more than 14 million service calls made annually. (source: company press release or website)

Why We Like It:
Several days ago we were successful in trading a rebound from the bottom of SHLD's trading range toward the top of its trading range. Now we're going to try and trade it the other way. The stock peaked at the top of its range around January 11th. As of Friday is looks poised to breakdown under the $120.00 level and its 50-dma. We're going to suggest a trigger to buy puts at $119.95. If triggered we'll target an exit in the $116.00-115.00 zone near the bottom of its trading range. Considering the stock's volatility and our stop loss this isn't the best risk/reward ratio.

Suggested Options:
We are suggesting the February puts.

BUY PUT FEB 125 KTQ-NE open interest=1053 current ask $6.40
BUY PUT FEB 120 KTQ-ND open interest=1397 current ask $3.80
BUY PUT FEB 115 KTQ-NC open interest=1549 current ask $1.90

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 03/07/06 (unconfirmed)
Average Daily Volume = 2.5 million

New Strangles

Ryland Group - RYL - close: 75.19 change: -2.06 stop: n/a

Company Description:
With headquarters in Southern California, Ryland is one of the nation's largest homebuilders and a leading mortgage-finance company. The Company currently operates in 27 markets across the country and has built more than 245,000 homes and financed more than 205,000 mortgages since its founding in 1967. (source: company press release or website)

Why We Like It:
It seems like the talk about a housing bubble has lasted a couple of years now. The only change is that in the last few months there is actually some economic data to suggest that home sales are slowing a little. 2006 is still expected to be a great year for the homebuilders based on the number of homes sold but investor expectations are changing and any missteps could bring some serious profit taking to the group. We think RYL makes an attractive strangle candidate for two reasons. First off it appears to have the necessary volatility to make our strangle play successful. The last nine months have seen RYL trading in the $57.50-82.50 range more than once. The second reason we like RYL is the company's earnings report. We don't have to wait long for it. RYL is expected to report earnings on Tuesday, January 24th. It's the earnings report and market reaction to it that will probably set the next trend. Will RYL breakout over resistance at near $82.50 or will that become a double-top pattern. Currently the stock has three-month old support (higher lows) near the $75 region. We have two days to open plays before the earnings report since RYL announces after the close on Tuesday. We're going to suggest an entry range of $75.50-74.50 to initiate strangles. At the current prices (see below) we're expecting RYL to be trading above $82 or under $68 before April option expiration.

Suggested Options:
We are suggesting the April strikes for this strangle. Traders will need to buy an out of the money call and an out of the money put. Our estimated cost is $7.00. We are aiming for a rise to $12.00.

BUY CALL APR 80 RYL-DP open interest=781 current ask $3.70
-and-
BUY PUT APR 70 RYL-PN open interest=852 current ask $3.30

Picked on January 22 at $ 75.19
Change since picked: + 0.00
Earnings Date 01/24/06 (confirmed)
Average Daily Volume = 1.1 million
 

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