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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
AAPL AMZN FDX
RACK RIMM  
  XMSR  

New Calls

Apple Computer - AAPL - close: 70.93 chg: +1.03 stop: 68.45

Company Description:
Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning desktop and notebook computers, OS X operating system, and iLife and professional applications. Apple is also spearheading the digital music revolution with its iPod portable music players and iTunes online music store. (source: company press release or website)

Why We Like It:
AAPL is bucking the recent down trend in tech stocks. Shares have rallied right back toward psychological support/resistance at the $70.00 level and rallied above technical resistance at the 100-dma. On a technical basis the stock's Point & Figure chart also looks positive with a bullish triangle breakout buy signal that points to a $101 target. We are a little bit cautious given the weakness in the NASDAQ so we want to see some confirmation of the up trend in AAPL. We are suggesting a trigger to buy calls at $72.25. If triggered then we'll target a rally into the $77.45-80.00 range.

Suggested Options:
We are going to suggest the May or June calls. May options will have three weeks to expiration.

BUY CALL MAY 70.00 QAA-EN open interest=38409 current ask $2.60
BUY CALL MAY 72.50 QAA-EE open interest=17315 current ask $1.50
BUY CALL MAY 75.00 QAA-EO open interest=13860 current ask $0.80

or

BUY CALL JUN 70.00 QAA-FN open interest= 2162 current ask $4.00
BUY CALL JUN 72.50 QAA-FE open interest= 1716 current ask $2.85
BUY CALL JUN 75.00 QAA-FO open interest= 1707 current ask $1.95

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/19/06 (unconfirmed)
Average Daily Volume = 36.0 million

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Rackable Systems - RACK - close: 51.39 chg: +2.82 stop: 47.39

Company Description:
Rackable Systems, Inc. is a provider of servers and storage products for scale out data center deployments. The company's servers are designed to provide benefits in the areas of density, thermal efficiency, serviceability, power distribution and remote management. Founded in 1999 and based in Milpitas, California, Rackable Systems serves Internet, semiconductor design, enterprise software, federal government, entertainment, financial services, oil and gas exploration and biotechnology customers worldwide. (source: company press release or website)

Why We Like It:
RACK is another relative strength/bullish breakout play. The stock has been soaring for months but the momentum stalled a few weeks ago as investors waited for the most recent earnings report. RACK delivered earnings on April 27th. The company beat estimates and guided higher going forward. The market reaction was Friday's 5.8% gain on huge volume several times the daily average. The technical picture has turned bullish again. Not only are the technical indicators turning positive but Friday's move is a breakout above its three-week pattern of lower highs. We are suggesting bullish positions with RACK above $50.00. More conservative traders might want to wait for a little more confirmation and look for a move over $52.50 before going long. Be aware that if the major averages really turn south then RACK could become a big target for profit taking. Our target for RACK is the $57.25-58.00 range. If you're the patient type then consider waiting for a pull back toward the $50.50-50.00 region before initiating a position.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 50.00 RQO-FJ open interest=572 current ask $5.30
BUY CALL JUN 55.00 RQO-FK open interest=460 current ask $3.00

Picked on April 30 at $ 51.39
Change since picked: + 0.00
Earnings Date 04/27/06 (confirmed)
Average Daily Volume = 825 thousand
 

New Puts

Amazon.com - AMZN - close: 35.21 chg: -0.53 stop: 36.51

Company Description:
Amazon.com, Inc., a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as health and personal care, jewelry and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, toys and baby, and home and garden. (source: company press release or website)

Why We Like It:
The technical picture for AMZN looks bearish. The daily chart's MACD appears to be rolling over into a new sell signal. Short-term oscillators are headed lower. The stock has been testing support near the $35.00 level for weeks and the P&F chart points to a $21.00 target. The market might be worried that rising gasoline prices will slow down consumer spending and impact sales at Amazon.com. However, one could make another argument that rising gas prices will have people driving less and therefore shopping more online. If you look at the chart it looks like investors are expecting a negative impact on sales. We want to catch a breakdown below support at $35.00. We're suggesting a trigger to buy puts at $34.85. If triggered we'll target a decline into the $31.00-30.75 range.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 37.50 ZQN-RU open interest=1143 current ask $2.65
BUY PUT JUN 35.00 ZQN-RG open interest=4588 current ask $1.15
BUY PUT JUN 32.50 ZQN-RZ open interest=1986 current ask $0.40

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 6.3 million

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Research In Motion - RIMM - cls: 76.63 chg: -1.62 stop: 80.01

Company Description:
Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications. (source: company press release or website)

Why We Like It:
Readers should know from the beginning that this is probably a higher-risk, aggressive play. RIMM has a tendency to be volatile and we're seeing mixed signals from the technical indicators. One indicator that is very easy to read is the P&F chart that has a sell signal pointing to a $74 target. That doesn't mean that $74 will act as support and the stock could easily overshoot the downside target. Another potential challenge for the bears is that RIMM could find support near the bottom of its March gap higher around $72. What is bearish is the post-earnings sell-off that began on April 7th. The bounce from $75 has struggled for two weeks to breakout over the simple 50-dma. Friday's failed rally looks like a new entry point to buy puts. We are going to suggest puts here with a target in the $71.00-70.00 range. More aggressive traders may want to aim lower. More conservative traders may want to wait for a new low under 74.60 before initiating positions. If you look at the weekly chart (below) you'll see a trendline of potential support as to why you might want to wait.

Suggested Options:
We are suggesting the June puts although nimble traders might want to play May puts. Just remember that May options expire in three weeks.

BUY PUT JUN 80.00 RUP-RP open interest=3627 current ask $5.40
BUY PUT JUN 75.00 RUP-RO open interest=8016 current ask $2.85
BUY PUT JUN 70.00 RUP-RN open interest=3502 current ask $1.20

Picked on April 30 at $ 76.63
Change since picked: + 0.00
Earnings Date 07/06/06 (unconfirmed)
Average Daily Volume = 5.8 million

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XM Satellite Radio - XMSR - cls: 20.27 chg: -0.52 stop: 20.55

Company Description:
XM is America's number one satellite radio service with more than 6.5 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City, the Country Music Hall of Fame in Nashville, Toronto and Montreal, XM's 2006 lineup includes more than 170 digital channels of choice from coast to coast: the most commercial-free music channels, sports, talk, comedy, children's and entertainment programming; and the most advanced traffic and weather information. (source: company press release or website)

Why We Like It:
Satellite radio leader XMSR missed the earnings estimate on Thursday and the stock gapped down toward support near the $20.00 level. Upward momentum had already begun to fade before the earnings report and now XMSR looks ready to begin a new leg lower. Aggressive traders might want to buy puts on a breakdown under the $20.00 mark. We are going to suggest a trigger to buy puts at $19.65, which is under the March low. Our target will be the $17.55-17.45 range. More aggressive traders may want to aim lower.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 22.50 QSY-RX open interest= 647 current ask $2.60
BUY PUT JUN 20.00 QSY-RD open interest= 456 current ask $0.95
BUY PUT JUN 17.50 QSY-RD open interest= 24 current ask $0.30

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/27/06 (confirmed)
Average Daily Volume = 7.9 million
 

New Strangles

Fedex - FDX - close: 115.13 chg: -0.07 stop: n/a

Company Description:
FedEx Corp. provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $32 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 260,000 employees and contractors to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities. (source: company press release or website)

Why We Like It:
We are going to try another strangle play. FDX remains in a pretty good up trend but momentum is waning. We suspect that market forces will produce a significant move in the stock over the next couple of months. May begins the worst six months of the year plus record high oil and the threat of the Iran scenario may eventually spark some heavy-duty profit taking in FDX. Alternatively, FDX could continue to shrug off the bear facts and continue to rise due to a healthy economy. We feel that this is a good entry point to consider a strangle since FDX has been consolidating mostly sideways for the past three weeks and that has bought the option premiums down. We're going to suggest a $115.50-114.50 entry zone. We are suggesting the June $120 calls and the June $110 puts. This is a bet that FDX will trade significantly north of $120 or under $110 by June option expiration.

Suggested Options:
This is a strangle play. Investors will need to buy both a call and a put option. Currently our estimated cost is about $2.60. We are looking for a rise to $4.00 (+53%).

BUY CALL JUN 120 FDX-FD open interest=212 current ask $1.40
-and-
BUY PUT JUN 110 FDX-RB open interest=523 current ask $1.20

Picked on April 30 at $115.13
Change since picked: + 0.00
Earnings Date 06/21/06 (unconfirmed)
Average Daily Volume = 1.4 million
 

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