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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
BHI CAH None
D ESRX  
EOG JEC  
RAI    

New Calls

Baker Hughes - BHI - close: 83.65 change: +1.76 stop: 79.75

Company Description:
Baker Hughes is a leading provider of drilling, formation evaluation, completion and production products and services to the worldwide oil and gas industry. (source: company press release or website)

Why We Like It:
Oil stocks were showing strength again on Friday. The outbreak of war in the Middle East is pushing crude oil to all-time highs. We don't believe the conflict with Israel is going to be over any time soon and if it was there is still Iran and N. Korea to keep geo-political tensions high. Plus, Nigeria is still experiencing trouble and the country is a major exporter. We like BHI as a bullish candidate. The stock is in the oil services sector and it has been out performing some of its peers and the market over the last few weeks. Shares are consolidating under short-term resistance at the $84.00 level. We are suggesting that readers buy calls now however more conservative traders may want to wait for a breakout over the $84.00 mark. Our target is the $89.00-90.00 range. The Point & Figure chart is bullish with a $100 price target. We do not want to hold over the late July earnings report.

Suggested Options:
We're suggesting the August calls. You, the individual trader, need to decide which strike best suits your risk profile.

BUY CALL AUG 80.00 BHI-HP open interest= 866 current ask $6.40
BUY CALL AUG 85.00 BHI-HQ open interest=2091 current ask $3.70
BUY CALL AUG 90.00 BHI-HR open interest= 524 current ask $1.85

Picked on July 16 at $ 83.65
Change since picked: + 0.00
Earnings Date 07/28/06 (confirmed)
Average Daily Volume = 4.3 million

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Dominion - D - close: 75.61 change: +0.61 stop: 74.49

Company Description:
Dominion is one of the nation's largest producers of energy, with an energy portfolio of about 28,100 megawatts of generation. Dominion also serves retail energy customers in nine states. (source: company press release or website)

Why We Like It:
If the market continues to see weakness or volatility then investors might decide to park their money in a traditional "safe haven" sector like dividend-paying utilities. We think shares of D make a good choice. Not only is D an electric utility with a 3.6% dividend yield. The company also has an oil and gas exploration business so rising crude and gas prices should also benefit the company. Bank of America came out with some positive comments on D this Friday and helped push the stock to a 0.8% gain. Shares of D have been consolidating under $76 and near its 200-dma for the last couple of weeks. We are suggesting that readers use a trigger at $76.05 to catch any bullish breakout. If triggered then we'll target the $81.00-82.00 range. More conservative traders might want to consider exiting near $80. If D can trade over $76.00 it will produce a fresh P&F chart buy signal. Please note that we do not want to hold over D's early August earnings report.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 75.00 D-HO open interest=1882 current ask $2.40
BUY CALL AUG 80.00 D-HP open interest= 380 current ask $0.45

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/03/06 (confirmed)
Average Daily Volume = 1.5 million

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EOG Resources - EOG - close: 70.15 change: +0.65 stop: 69.90

Company Description:
EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, offshore Trinidad and the United Kingdom North Sea. (source: company press release or website)

Why We Like It:
EOG is another bullish candidate in the oil sector. The stock has been consolidating mostly sideways this past week and traders bought the dip on Friday morning. We suspect that oil will continue to be strong and strength in the sector and the commodity should be able to fuel a bullish breakout in EOG above its six-month trendline of resistance (see chart). We are suggesting that readers use a trigger to buy calls at $72.55. If triggered our target will be the $77.50-80.00 range. More aggressive traders might want to consider an early entry on a move past the 200-dma near $71.00. The P&F chart is bullish with a $76 target. We do not want to hold over the early August earnings report.

Suggested Options:
We are suggesting the August calls. Our trigger to buy calls is at $72.55.

BUY CALL AUG 70.00 EOG-HN open interest=2025 current ask $4.50
BUY CALL AUG 75.00 EOG-HO open interest= 798 current ask $2.45

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/01/06 (confirmed)
Average Daily Volume = 3.5 million

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Reynolds American - RAI - close: 119.44 chg: +1.75 stop: 117.45

Company Description:
Reynolds American Inc. is the parent company of R.J. Reynolds Tobacco Company, Conwood Company, L.P., Santa Fe Natural Tobacco Company, Inc., Lane Limited and R.J. Reynolds Global Products, Inc. R.J. Reynolds Tobacco Company, the second-largest U.S. tobacco company, manufactures about one of every three cigarettes sold in the country. (source: company press release or website)

Why We Like It:
In spite of all the market weakness this past week shares of RAI are still trading near all-time highs. The stock has spent the last few days consolidating sideways under the $120 level and Friday saw a strong bounce from the rising 10-dma. Not only is RAI a relative strength play but investors could be moving money into the stock as a "safe haven" play during this market turmoil. RAI still has a 4.1% dividend yield and that's pretty attractive. Currently the Point & Figure chart points to a $148 price target. We are going to suggest a trigger to buy calls at $120.20. If we are triggered our short-term target is the $124.50-125.00 range. We have a limited amount of time for this play to work since we plan to exit ahead of the late July earnings report.

Suggested Options:
We are suggesting the August calls. Our trigger to buy calls is at $120.20.

BUY CALL AUG 120.00 RAI-HD open interest=3324 current ask $3.80
BUY CALL AUG 125.00 RAI-HE open interest= 653 current ask $1.70

Picked on July xx at $xxx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume = 636 thousand
 

New Puts

Cardinal Health - CAH - cls: 62.80 chg: -0.57 stop: 65.25

Company Description:
Headquartered in Dublin, Ohio, Cardinal Health, Inc. is a $75 billion, global company serving the health-care industry with a broad portfolio of products and services. Through its diverse offering, Cardinal Health delivers integrated health-care solutions that help customers reduce their costs, improve efficiency and deliver better care to patients. The company manufactures, packages and distributes pharmaceuticals and medical supplies, offers a range of clinical services and develops automation products that improve the management and delivery of supplies and medication for hospitals, physician offices and pharmacies. (source: company press release or website)

Why We Like It:
Shares of CAH look poised to begin a new leg lower. The stock broke down under support at its 200-dma and the $65.00 level back in June. Now shares have spent the last four weeks consolidating sideways between $65.50 and the $62.40 region. If you look at the daily chart it looks like CAH produced a big bearish engulfing candlestick pattern with a high for the day at $65.21. That looks like a bad tick since we don't see the rise to $65 on the intraday chart. However, the pattern remains bearish even without the bearish-reversal candlestick. Currently the P&F chart points to a $40.00 target. We are suggesting a trigger to buy puts at $62.25. If triggered then we'll target a decline into the $57.75-57.00 range. More aggressive traders might want to aim for the $55 region. We do not want to hold over the early August earnings report.

Suggested Options:
We are suggesting the August puts. Our trigger to buy puts is at $62.25.

BUY PUT AUG 65.00 CAH-TM open interest= 759 current ask $2.85
BUY PUT AUG 60.00 CAH-TL open interest=2611 current ask $0.75

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 08/03/06 (confirmed)
Average Daily Volume = 1.6 million

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Express Scripts - ESRX - cls: 69.85 chg: -1.50 stop: 71.51

Company Description:
Express Scripts, Inc. is one of the largest PBM companies in North America, providing PBM services to over 50 million members. Express Scripts serves thousands of client groups, including managed-care organizations, insurance carriers, employers, third-party administrators, public sector, and union-sponsored benefit plans. (source: company press release or website)

Why We Like It:
It looks like the oversold bounce in ESRX is fading. Shares have spent the last couple of weeks consolidating above support at the $70.00 level. Unfortunately for the bulls that support fell on Friday with ESRX's 2.1% decline. Aggressive traders might want to buy puts right here. We want to see a bit more confirmation so we're using a trigger at $69.30, which is underneath Friday's low. If triggered our target is the $64.50-64.00 range, near the June lows. We do not want to hold over the July 26th earnings report.

Suggested Options:
We are suggesting the August puts. Our trigger to buy puts is at $69.30.

BUY PUT AUG 70.00 XTQ-TN open interest=1541 current ask $3.50
BUY PUT AUG 65.00 XTQ-TM open interest=1564 current ask $1.55

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/26/06 (confirmed)
Average Daily Volume = 2.0 million

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Jacobs Engineering - JEC - cls: 73.75 chg: -1.49 stop: 77.55

Company Description:
Jacobs, with over 40,000 employees and revenues exceeding $6.0 billion, provides technical, professional, and construction services globally. (source: company press release or website)

Why We Like It:
Concerns about a slowing economy may be weighing on shares of JEC. The stock's rally in June stalled near the $80 level and its descending 50-dma. This happens to be the top of its wide, descending, bearish channel. Friday's decline was a breakdown below technical support at its 200-dma and the $74.00 level. Friday also saw JEC's daily chart produce a sell signal on its MACD indicator. We are suggesting puts with JEC under the $75.00 level. Our target is the $69.00 level near the June lows. More conservative traders may want to exit at $70 while aggressive traders may want to aim lower. Bear in mind that we do not want to hold over the July 25th earnings report so we only have six trading days.

Suggested Options:
We are suggesting the August puts.

BUY PUT AUG 75.00 JEC-TO open interest=273 current ask $4.10
BUY PUT AUG 70.00 JEC-TN open interest=234 current ask $1.90

Picked on July 16 at $ 73.75
Change since picked: + 0.00
Earnings Date 07/25/06 (confirmed)
Average Daily Volume = 583 thousand
 

New Strangles

None today.
 

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