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Call Options Plays
Put Options Plays
Strangle Options Plays
BNI None None
BSC    
DE    
GWW    
LEH    
MHS    

New Calls

Burlington NrthSanta Fe - BNI - cls: 81.10 chg: +1.65 stop: 78.99

Company Description:
Burlington Northern Santa Fe Corporation's subsidiary BNSF Railway Company operates one of the largest railroad networks in North America, with about 32,000 route miles in 28 states and two Canadian provinces. The railway is among the world's top transporters of intermodal traffic, moves more grain than any other American railroad, transports the components of many of the products we depend on daily, and hauls enough low-sulphur coal to generate about ten percent of the electricity produced in the United States. (source: company press release or website)

Why We Like It:
The Dow Jones Transportation index closed at another new all-time record high. Pushing the index higher is strength in the railroads. Shares of BNI rebounded with a 2% gain today although volume was light on the rally. The stock looks overbought on a long-term chart so you'd have to consider this a momentum play. Investors seem to be turning to railroads since trains offer better efficiency than trucks given the price of fuel. Strong demand for commodities across the country is also keeping business strong for the railroad industry. More aggressive traders might want to consider long positions on today's bounce. We are going to wait for a breakout over resistance in the $82.00 region. We're suggesting that traders use a trigger at $82.51 to open new call positions. If triggered we'll target a rally into the $87.50-90.00 range. We do not want to hold over BNI's late April earnings report.

Suggested Options:
We are suggesting the April and May options but our preference is for May strikes so we can hold the position right up to the April earnings date. Our trigger to buy calls is at $82.51.

BUY CALL MAY 80 BNI-EP open interest= 60 current ask $4.00
BUY CALL MAY 85 BNI-EQ open interest=146 current ask $1.70

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/25/06 (unconfirmed)
Average Daily Volume = 2.1 million

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Bear Stearns - BSC - close: 136.37 change: +3.07 stop: 131.99

Company Description:
The Bear Stearns Companies Inc. is the parent company of Bear, Stearns & Co. Inc., a leading global investment banking, securities trading and brokerage firm. Since 1923, we have helped corporations, institutions, governments and individuals reach their financial objectives. Clients have come to rely on the breadth of our expertise, our commitment to client service and our innovative approach to problem-solving. (source: company press release or website)

Why We Like It:
Morgan Stanley (MS) reported earnings today and beat analyst estimates by a mile. This sparked a strong rebound in the broker-dealer sector, which had seen many stocks in the group consolidate back toward various support levels. Today's bounce in BSC could be used as a new entry point to buy calls, especially given the bullish engulfing candlestick pattern. However, we are going to wait for a breakout over resistance in the $137.00 region. The current high is $137.55 so we're going to suggest a trigger to buy calls at $137.65. If triggered we're going to target a rally into the $144.00-145.00 range.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 135 BSC-EG open interest=186 current ask $5.60
BUY CALL MAY 140 BSC-EH open interest=104 current ask $2.95
BUY CALL MAY 145 BSC-EI open interest=122 current ask $1.35

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 06/15/06 (unconfirmed)
Average Daily Volume = 1.1 million

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Deere Co - DE - close: 77.29 change: +0.95 stop: 74.95

Company Description:
John Deere is the world's leading manufacturing of agricultural and forestry equipment; a leading supplier of equipment used in lawn, grounds and turf care; and a major manufacturer of construction equipment. Additionally, John Deere manufacturers engines used in heavy equipment and provides financial services and other related activities that support the core businesses. (source: company press release or website)

Why We Like It:
Both Caterpillar (CAT) and Deere (DE) have been flirting with new highs over the last few weeks. Both have been displaying relative strength over the past few months. We like DE as a bullish candidate because shares are just now bouncing near the bottom of its rising channel. It is noteworthy that the bounce today was not as close to the bottom of its channel as we would have liked it. A better entry point would have been on a bounce near $75.00 and/or its simple 50-dma. However, given the strength in the major market indices today and DE's reaction we may not see a bounce near $75 any time soon. Thus this is a more aggressive, higher-risk entry point. Another risk by opening call positions here is that DE still has overhead resistance in the $79.00-79.40 range. More conservative traders may want to wait for a move over 79.50 or even the $80.00 mark before considering new bullish plays. Our target is the $84.00-85.00 range. The P&F chart is bullish and points to a $112 target.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 75 DE-EO open interest= 17 current ask $4.20
BUY CALL MAY 80 DE-EP open interest=149 current ask $1.65

Picked on March 22 at $ 77.29
Change since picked: + 0.00
Earnings Date 05/16/06 (unconfirmed)
Average Daily Volume = 1.6 million

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Grainger W.W.Inc. - GWW - close: 76.00 change: +1.34 stop: 73.95

Company Description:
W.W. Grainger, Inc., with 2005 sales of $5.5 billion, is the leading broad line supplier of facilities maintenance products serving businesses and institutions throughout North America. Through a highly integrated network including nearly 600 branches, 18 distribution centers and multiple Web sites, Grainger's employees help customers get the job done, saving them time and money by having the right products to keep their facilities running. (source: company press release or website)

Why We Like It:
GWW is a bullish breakout play. The stock is breaking from a trading range between $70 and $75.50. Today's session produced a new bullish engulfing candlestick pattern but volume has been very low over the last few days. The low volume is a concern. Therefore we want to see some confirmation that this breakout has legs. We're going to suggest a trigger to buy calls at $76.51. More aggressive traders may want to open positions here or over $76.25. If triggered we'll target a rally into the $79.90-80.00 range. The P&F chart is bullish with a triple-top breakout buy signal pointing to a $90 target.

Suggested Options:
We do not want to hold over the mid April earnings report so we're suggesting April calls.

BUY CALL APR 75 GWW-DO open interest=812 current ask $2.60
BUY CALL APR 80 GWW-DP open interest=553 current ask $0.65

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/15/06 (unconfirmed)
Average Daily Volume = 449 thousand

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Lehman Brothers - LEH - close: 144.61 change: +2.62 stop: 140.79

Company Description:
Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private investment management, asset management and private equity. The Firm is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world. (source: company press release or website)

Why We Like It:
A better than expected earnings report from Morgan Stanley (MS) launched a rally in the broker-dealer sector. Shares of LEH had drifted back toward support at its rising 50-dma. Today's bounce from support looks like a great place to consider new bullish positions. Short-term technical oscillators are turning positive and its daily MACD is hinting at a bullish turnaround. Please note that there appears to be bad tick during today's session. Most services will quote that the low today was $140.80. If you look on an intraday chart we don't see LEH trading under $141.40. We're going to stock our stop loss at $140.79. Buying calls right here is a little bit aggressive. LEH still has a short-term trend of lower highs. More conservative traders may want to wait for a move over $145.50 or $146.00 before initiating new bullish positions. We do expect some resistance in the $149-150 region but LEH looks like it has the momentum to breakout higher. Conservative traders may want to exit near $149. We're going to aim for the $153.00-155.00 range.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 140 LES-EH open interest=107 current ask $8.10
BUY CALL MAY 145 LES-EI open interest= 95 current ask $4.80
BUY CALL MAY 150 LES-EJ open interest=105 current ask $2.60

Picked on March 22 at $144.61
Change since picked: + 0.00
Earnings Date 06/14/06 (unconfirmed)
Average Daily Volume = 2.0 million

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MedcoHealth - MHS - close: 59.19 change: +0.54 stop: 57.95

Company Description:
Medco Health Solutions, Inc. is a leader in managing prescription drug benefit programs that are designed to drive down the cost of pharmacy healthcare for private and public employers, health plans, labor unions and government agencies of all sizes. With its technologically advanced mail-order pharmacies and its award-winning Internet pharmacy, Medco has been recognized for setting new industry benchmarks for pharmacy dispensing quality. Medco serves the needs of patients with complex conditions requiring sophisticated treatment through its specialty pharmacy operation, which became the nation's largest with the 2005 acquisition of Accredo Health. Medco, the highest-ranked prescription drug benefit manager on Fortune magazine's list of "America's Most Admired Companies," is a Fortune 50 company with 2005 revenues of nearly $38 billion. (source: company press release or website)

Why We Like It:
Drug stocks got a boost today after BMY and SNY settled their legal dispute with Apotex Inc. Market reaction influenced the whole sector and the DRG drug index rose 2% to breakout to new 18-month highs. We suspect that if the DRG drug index continues to rally, now that it has broken out above resistance, then shares of MHS will produce a breakout of its own. Shares of MHS are consolidating sideways under resistance at the $60.00 mark. The stock is already trading near its all-time highs so a breakout over $60 would put MHS in blue-sky territory. We're going to suggest a trigger to buy calls at $60.05. If triggered we'll target a rally into the $64.50-65.00 range. The P&F chart already points to a $68 target.

Suggested Options:
We are going to suggest the May options but we plan to exit ahead of MHS' April earnings report. Our trigger is $60.05.

BUY CALL MAY 55 MHS-EK open interest= 0 current ask $5.60
BUY CALL MAY 60 MHS-EL open interest=75 current ask $2.35
BUY CALL MAY 65 MHS-EM open interest=85 current ask $0.70

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/25/06 (unconfirmed)
Average Daily Volume = 1.6 million
 

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New Strangles

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