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Call Options Plays
Put Options Plays
Strangle Options Plays
None APD DHI
  APOL KBH

New Calls

None today.
 

New Puts

Air Products Chem. - APD - close: 62.95 chg: -1.10 stop: 65.01

Company Description:
Air Products serves customers in technology, energy, healthcare and industrial markets worldwide with a unique portfolio of products, services and solutions, providing atmospheric gases, process and specialty gases, performance materials and chemical intermediates. Founded in 1940, Air Products has built leading positions in key growth markets such as semiconductor materials, refinery hydrogen, home healthcare services, natural gas liquefaction, and advanced coatings and adhesives. (source: company press release or website)

Why We Like It:
Everything appears to be pointing lower for APD. The Point & Figure chart is bearish and points to a $50.00 target. The weekly chart has produced a bearish engulfing candlestick pattern just this past week. The daily chart has seen APD produce a failed rally under $65.00 and its 50-dma and 100-dma. Meanwhile its MACD is nearing a new sell signal. The only thing bears would like to see more of is volume. We are suggesting that traders consider buying puts with APD under $64.00. Our short-term target is the $59.00-58.00 range. It's short-term because we do not want to hold over the late July earnings report.

Suggested Options:
We are suggesting the August puts. You, the individual trader, need to choose which strike price best suits your risk profile.

BUY PUT AUG 65.00 APD-TM open interest= 22 current ask $2.85
BUY PUT AUG 60.00 APD-TL open interest= 0 current ask $0.80

Picked on July 09 at $ 62.95
Change since picked: + 0.00
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume = 1.2 million

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Apollo Group - APOL - close: 49.92 chg: -0.97 stop: 52.51

Company Description:
Apollo Group Inc. has been providing higher education programs to working adults for almost 30 years. Apollo Group Inc., operates through its subsidiaries: The University of Phoenix Inc., Institute for Professional Development, The College for Financial Planning Institutes Corp., and Western International University Inc. The consolidated enrollment in its educational programs makes it the largest private institution of higher education in the United States. It offers educational programs and services at 97 campuses and 159 learning centers in 39 states, Puerto Rico, Alberta, British Columbia, Netherlands, and Mexico. (source: company press release or website)

Why We Like It:
APOL has spent the last four months consolidating sideways between $50.00 and the $56.00 region. If you look at the daily chart is looks like a new (bearish) double-top pattern. Friday's 1.9% decline pushed APOL under support at the $50.00 level and left the stock poised to move lower. The P&F chart is bearish and points to a $44 target. We are suggesting put options with APOL under $50.00 although more aggressive traders might want to consider a failed rally under $51.00 as a new entry point. We do expect some support near the $47.50 region (around the March lows) but our target is the $45.50-45.00 range.

Suggested Options:
We are suggesting the August puts. You, the individual trader, need to choose which strike price best suits your risk profile.

BUY PUT AUG 50.00 OAQ-TJ open interest=1704 current ask $2.10
BUY PUT AUG 45.00 OAQ-TI open interest= 646 current ask $0.50

Picked on July 09 at $ 49.92
Change since picked: + 0.00
Earnings Date 09/19/06 (unconfirmed)
Average Daily Volume = 1.4 million
 

New Strangles

D.R.Horton - DHI - close: 23.90 change: +0.09 stop: n/a

Company Description:
D.R. Horton, Inc., America's Builder, is the largest homebuilder in the United States, delivering more than 51,000 homes in its fiscal year ended September 30, 2005. Founded in 1978 in Fort Worth, Texas, D.R. Horton has expanded its presence to include 82 markets in 27 states in the Mid-Atlantic, Midwest, Southeast, Southwest and Western regions of the United States. The Company is engaged in the construction and sale of high quality homes with sales prices ranging from $90,000 to over $900,000. D.R. Horton also provides mortgage financing and title services for homebuyers through its mortgage and title subsidiaries. (source: company press release or website)

Why We Like It:
The month-long sideways consolidation in DHI and its upcoming earnings report sounds like a good recipe for a strangle. We are suggesting that readers consider opening strangle plays between $23.75 and $24.25. If the onset of earnings season doesn't spark some big moves in the market that DHI can follow then the company's own earnings report in late July (20th) should do the trick. This is one case where we do want to hold over the earnings report. We don't care which way DHI moves as long as it moves far enough before August expiration. Our estimated cost is about $1.70 so we need to see DHI move north of $26.00 or under $22.00 to put us in the green. Right now we're planning to exit if either option rises to $2.55 or more.

Suggested Options:
A strangle involves buying both a call option and a put option. Try and keep the amount invested relatively equal on both the call side and put side of the play otherwise the play is no longer neutral.

BUY CALL AUG 25.00 DHI-HE open interest=2587 current ask $0.90
-and-
BUY PUT AUG 22.50 DHI-TX open interest= 870 current ask $0.80

Picked on July 09 at $ 23.90
Change since picked: + 0.00
Earnings Date 07/20/06 (confirmed)
Average Daily Volume = 3.7 million

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KB Home - KBH - close: 45.76 change: -0.24 stop: n/a

Company Description:
Building homes for nearly half a century, KB Home is one of America's premier homebuilders with domestic operating divisions in some of the fastest-growing regions and states: West Coast--California; Southwest--Arizona, Nevada and New Mexico; Central--Colorado, Illinois, Indiana, Louisiana and Texas; and Southeast--Florida, Georgia, Maryland, North Carolina, South Carolina and Virginia. Kaufman & Broad S.A., the Company's publicly-traded French subsidiary, is one of the leading homebuilders in France. In fiscal 2005, the Company delivered homes to 37,140 families in the United States and France. KB Home also offers complete mortgage services through Countrywide KB Home Loans, a joint venture with Countrywide Financial Corporation. (source: company press release or website)

Why We Like It:
KBH is another homebuilder with a similar sideways consolidation. We suspect that the stock and the sector are poised to breakout but we don't know what direction. In order to capture the next move we're suggesting a strangle play. We could opt for a straddle play where you buy both a call and a put at the same strike, in this case the $45.00 strike, but that would cost about $4.75. The strangle will be less expensive. We are suggesting that readers consider strangle plays in the $46.00-44.00 range. At current prices our estimated cost is about $1.45. A significant move towards $50 or the $40 level should put us into the green. What makes this play different than DHI is that we don't have KBH's earnings report to use as a catalyst to move the stock and will have to depend on market and sector movement. We would like to exit if either option rises to $2.45 or more.

Suggested Options:
A strangle involves buying both a call option and a put option. Try and keep the amount invested relatively equal on both the call side and put side of the play otherwise the play is no longer neutral.

BUY CALL AUG 50.00 KBH-HJ open interest=1180 current ask $0.85
-and-
BUY PUT AUG 40.00 KBH-TH open interest=2206 current ask $0.60

Picked on July 09 at $ 45.76
Change since picked: + 0.00
Earnings Date 09/14/06 (unconfirmed)
Average Daily Volume = 2.4 million
 

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