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New Strangles

Loews Corp. - LTR - close: 95.72 change: -0.13 stop: n/a

Company Description:
Loews Corporation has grown to include CNA Financial Corporation; Lorillard, Inc.; Diamond Offshore Drilling, Inc.; Boardwalk Pipelines, LLC; Bulova Corporation, and Loews Hotels. (source: company press release or website)

Why We Like It:
LTR has failed to trigger as a bearish candidate for us and we are switching to a strangle play to take advantage of any post-earnings volatility. Readers need to know that this is purely a speculative play. Odds of losing all or most of our capital are probably pretty high since LTR has resistance in the $100-101 region and support in the $90-88 region, bolstered by its rising 200-dma. Buying this strangle is a bet that LTR will be trading at more than $102 or less than $88 by March expiration. LTR is due to report earnings on Thursday, February 16th before the market open. That gives us two days to launch strangle positions. We're suggesting strangles because the cost is lower than a straddle.

Suggested Options:
As a strangle play traders need to buy an out of the money call and an out of the money put. Try and keep your investment amount relatively balanced on both sides. Our estimated cost is $1.75. We are looking for an exit at $3.50 (+100%).

BUY CALL MAR 100 LTR-CT open interest=225 current ask $0.95
-and-
BUY PUT MAR 90 LTR-OR open interest=715 current ask $0.80

Picked on February 13 at $ 95.72
Change since picked: + 0.00
Earnings Date 02/16/06 (confirmed)
Average Daily Volume = 513 thousand
 

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