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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
BSC None None
CDWC    
CLF    
GS    

New Calls

Bear Stearns - BSC - close: 142.20 chg: +3.60 stop: 137.99

Company Description:
Founded in 1923, Bear, Stearns & Co. Inc. is a leading investment banking and securities trading and brokerage firm, and the major subsidiary of The Bear Stearns Companies Inc. With approximately $57.6 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales and trading, securities research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers financing, securities lending, clearing and technology solutions to hedge funds, broker-dealers and investment advisors. Headquartered in New York City, the company has approximately 12,000 employees worldwide. (source: company press release or website)

Why We Like It:
We suspect that the profit taking in the brokerage and investment stocks is over. Bulls are stepping in to buy the dip and the recent bounce looks like a new entry point to buy calls. Shares of BSC did break support near $140.00 but it failed to truly break technical support at its rising 50-dma. Now short-term technical oscillators are turning higher with Friday's rebound. We are concerned a little bit about the lack of volume in BSC so we are going to suggest that readers wait and use a trigger to buy calls at $144.10. That should confirm the rebound. We do see some resistance at $148 but our target is going to be the $149.50-150.00 range. Our time frame is six weeks. Please note that we are suggesting two plays in the brokerage sector. We're not suggesting you play both of them. Find the stock that you like the best. The other candidate is GS. The bounce in LEH looks tempting but we're going to watch it for another day or two.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 140.00 BSC-FH open interest=1465 current ask $6.10
BUY CALL JUN 145.00 BSC-FI open interest= 496 current ask $3.40
BUY CALL JUN 150.00 BSC-FJ open interest= 461 current ask $1.70

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 06/15/06 (unconfirmed)
Average Daily Volume = 1.2 million

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CDW Corp. - CDWC - close: 59.33 chg: +0.60 stop: 57.99

Company Description:
CDW was founded in 1984 and employs approximately 4,350 coworkers. In 2005, the company generated sales of $6.3 billion. CDW's direct model offers one-on-one relationships with knowledgeable account managers; purchasing by telephone, fax, the company's award-winning CDW.com web site, customized CDW@work(TM) extranets, CDWG.com web site and macwarehouse.com web site; custom configured solutions and same day shipping; and pre- and post-sales technical support, with approximately 120 factory-trained and A+ certified technicians on staff. (source: company press release or website)

Why We Like It:
Shares of CDWC are beginning to bounce from its recent consolidation and this looks like an entry point to buy calls. The stock spiked higher a couple of weeks ago after announcing a strong earnings report but then proceeded to retrace back to the $58.00 level virtually filling the gap. The P&F chart is bullish and points to a $70.00 target. We are going to aim for a rise into the $64-65 range but we do expect some resistance in the $61.50-62.00 zone.

Suggested Options:
We are suggesting the June or July calls. Select which strike best suits your risk and trading style.

BUY CALL JUN 55.00 DWQ-FK open interest= 42 current ask $4.90
BUY CALL JUN 60.00 DWQ-FL open interest=707 current ask $1.50

BUY CALL JUL 60.00 DWQ-GL open interest=2140 current ask $2.25
BUY CALL JUL 65.00 DWQ-GM open interest= 392 current ask $0.70

Picked on May 07 at $ 59.33
Change since picked: + 0.00
Earnings Date 04/25/06 (confirmed)
Average Daily Volume = 880 thousand

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Cleveland Cliffs - CLF - close: 93.51 chg: +1.96 stop: 89.95

Company Description:
Cleveland-Cliffs Inc, headquartered in Cleveland, Ohio, is the largest producer of iron ore pellets in North America and sells the majority of its pellets to integrated steel companies in the United States and Canada. Cleveland-Cliffs Inc operates a total of six iron ore mines located in Michigan, Minnesota and Eastern Canada. The Company is majority owner of Portman Limited, the third-largest iron ore mining company in Australia, serving the Asian iron ore markets with direct-shipping fines and lump ore. (source: company press release or website)

Why We Like It:
Metal and mining-related stocks continue to show strength. The U.S. and global economies are still running strong and that's boosting demand for commodities. It would be tempting to go long calls on CLF here with the breakout over $90.00 and the breakout over its 100-dma but we still see resistance at the $95.00 level. Therefore we're suggesting a trigger to buy calls at $95.11. If triggered we'll target an eight-week run towards the $104.50-105.00 range. More conservative traders may want to exit near potential resistance at the $100.00 mark. A move over $95.00 should produce a new P&F buy signal. More aggressive traders may want to think about buying a bounce from the $90.00 level if one presents itself.

Suggested Options:
We are suggesting the June and July calls. Select the strike that best suits your risk and trading style.

BUY CALL JUN 90.00 CLF-FR open interest=254 current ask $7.30
BUY CALL JUN 95.00 CLF-FS open interest=903 current ask $4.60
BUY CALL JUN100.00 CLF-FT open interest=633 current ask $2.70

BUY CALL JUL 95.00 CLF-GS open interest=555 current ask $6.70
BUY CALL JUL100.00 CLF-GT open interest=427 current ask $4.60

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/26/06 (confirmed)
Average Daily Volume = 692 thousand

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Goldman Sachs - GS - cls: 164.39 chg: +6.35 stop: 157.95

Company Description:
Goldman Sachs is a leading global investment banking, securities and investment management firm. (source: company press release or website)

Why We Like It:
GS is another brokerage stock that showed a lot of relative strength on Friday. Shares had consolidated back toward support near its rising 40 and 50-dma's but that's where traders stepped in to buy the dip. Now with the financial stocks and the broader market indices pushing higher we suspect that the brokers will return to new highs. We're going to suggest call positions right here but traders have a choice. You can look for a dip back toward $160-161.00 or wait for a rise past $165.00. We would definitely prefer a dip. After Friday's 4% rise the call options are probably a little rich and a dip would help us get a better price. Technically the picture for GS is improving. The MACD is hinting at a bullish reversal while short-term oscillators are already turning positive. The P&F chart points to a $172 target. We are going to target a rise into the $174.00-175.00 range. We'll plan to exit ahead of the June 13th earnings report. GS is one of two brokerage stocks we're adding to the newsletter. We suggest you pick the stock that you like best instead of trying to trade them all.

Suggested Options:
We are going to suggest the June calls since we plan to exit ahead of the June earnings report.

BUY CALL JUN 160 GPY-FL open interest=1174 current ask $8.20
BUY CALL JUN 165 GPY-FM open interest=1046 current ask $5.30
BUY CALL JUN 170 GPY-FN open interest=1698 current ask $3.20

Picked on May 07 at $164.39
Change since picked: + 0.00
Earnings Date 06/13/06 (unconfirmed)
Average Daily Volume = 3.9 million
 

New Puts

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New Strangles

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