Option Investor
New Plays

New Option Plays

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BSC None None

New Calls

Play Editor's note: We are not adding a lot of new plays to the newsletter this weekend. If you read this weekend's market wrap then you already know that our market bias is mostly flat as we head towards the next interest rate decision on Thursday's FOMC meeting. With that in mind we would not be in a rush to open new positions ahead of the Fed's decision.


Bear Stearns - BSC - cls: 134.95 chg: -0.30 stop: 129.99

Company Description:
Founded in 1923, The Bear Stearns Companies Inc. is the parent company of Bear, Stearns & Co. Inc., a leading investment banking and securities trading and brokerage firm. With approximately $58.4 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 12,500 employees worldwide. (source: company press release or website)

Why We Like It:
The XBD broker-dealer index is on the verge of breaking out from its multi-week bearish channel. Many of the technical indicators are already bullish. All the XBD needs appears to be a push past the 210 level. Potentially leading the way higher is BSC. BSC has rebounded very sharply from its June lows and is now challenging resistance at its 50-dma and 100-dma in addition to its eight-week trendline of lower highs. We want to catch a breakout if BSC does continue higher. Thus we're suggesting a trigger at $137.51. There is potential resistance in the $139-140 region but if BSC can trade over $138.00 it would produce a new P&F buy signal. We wouldn't be surprised by a rally to $140 and a pull back toward $136-135 before moving higher again so you don't have to buy the first breakout over the 50-dma. You could wait for a pull back. Our target is the $144.50-147.50 range.

Suggested Options:
We are suggesting the August calls (if triggered at $137.51).

BUY CALL AUG 135.00 BSC-HG open interest=161 current ask $5.90
BUY CALL AUG 140.00 BSC-HH open interest=104 current ask $3.50
BUY CALL AUG 145.00 BSC-HI open interest= 58 current ask $1.90

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 09/14/06 (unconfirmed)
Average Daily Volume = 1.5 million


Marathon Oil - MRO - close: 76.72 chg: +1.84 stop: 73.95

Company Description:
Marathon Oil Corporation is engaged in the worldwide exploration and production of crude oil and natural gas, as well as the domestic refining, marketing and transportation of petroleum products. (source: company press release or website)

Why We Like It:
Oil stocks are on the rebound. The merger/takeover news provided by APC on Friday reignited investor interest in the sector. There are several stocks in the sector that are starting to look attractive. We like MRO because shares have already broken out above its eight-week trendline of resistance. Aggressive traders may want to buy calls now. We're going to wait. We want to see more confirmation so we're suggesting a trigger to buy calls at $77.55. If triggered then we'll target a run into the $84.00-85.00 range. We do not want to hold over the late July earnings report. The P&F chart looks pretty bullish with a bounce from support and an $85 target.

Suggested Options:
We are suggesting the August calls (if triggered).

BUY CALL AUG 75.00 MRO-HO open interest=433 current ask $5.40
BUY CALL AUG 80.00 MRO-HP open interest=699 current ask $2.95
BUY CALL AUG 85.00 MRO-HQ open interest= 78 current ask $1.50

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 3.2 million

New Puts

None today.

New Strangles

None today.

New Play Archives