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New Plays

New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
None CME BOL
  OIH LLL
    MMM
    PD

New Calls

None today.
 

New Puts

Chicago Merc. - CME - close: 452.00 change: -11.00 stop: n/a

Company Description:
CME is the largest futures exchange in the United States and also owns and operates the largest futures Clearing House in the world. CME products fall into five major areas: interest rates, equities, foreign exchange, agricultural commodities and alternative investments. (source: company press release or website)

Why We Like It:
We are adding CME to the newsletter as a put candidate as a pure speculation play. The stock has been in rocket-mode since the April 2005 bottom near $164. Now shares of CME have produced what appears to be a bearish double-top pattern near $500 over the last couple of months. The stock is now breaking down from a short-term sideways consolidation and Friday's decline put CME under technical support at its 100-dma. Here's the plan. CME is due to report earnings on Tuesday, July 25th before the market open. Tomorrow (Monday) is our only time to buy puts and open positions in an attempt to capture any post-earnings sell-off. We want to remind readers this is pure speculation that given the chart's bearish posture (albeit in a long-standing up trend) and the market's weakness that investors will choose to sell the news no matter what CME says. If the stock bounces at all on Tuesday we'd expect a 100% loss on the play. We're not even listing a stop loss until we see the post-earnings reaction. FYI: The P&F chart points to a $408 target.

Suggested Options:
We are suggesting the August puts.

BUY PUT AUG 400 CMJ-TK open interest= 635 current ask $3.10
BUY PUT AUG 410 CMJ-TM open interest= 546 current ask $4.70

Picked on July 23 at $452.00
Change since picked: - 0.00
Earnings Date 07/25/06 (confirmed)
Average Daily Volume = 680 thousand

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Oil Serv. Holders - OIH - cls: 130.00 chg: -4.30 stop: 134.26

Company Description:
The OIH HOLDRs provides a chance to trade the oil services industry through a basket of stocks. Currently the OIH represents 18 companies.

(source: company press release or website)

Why We Like It:
The oil service stocks have been sinking in spite of record crude oil prices and a conflict in the Middle East. The last couple of weeks have seen the OIH holders breakdown under support near $140 and its 200-dma. Now the OIH is poised to breakdown under support at the $130 level and what appears to be the neckline to a bearish Head-and-Shoulders pattern (see below). We are going to suggest a trigger at $129.00 to open put positions. If triggered our short-term target is the $120.00 level. The Point & Figure chart points to a $106 target and the H&S pattern projects a $90 target so more aggressive traders may want to aim lower.

Suggested Options:
We are suggesting the August puts.

BUY PUT AUG 130 OIH-TF open interest=10206 current ask $6.00
BUY PUT AUG 125 OIH-TE open interest= 8901 current ask $3.90
BUY PUT AUG 120 OIH-TD open interest= 6492 current ask $2.30

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 11.6 million
 

New Strangles

Bausch Lomb - BOL - close: 47.40 change: -0.57 stop: n/a

Company Description:
Bausch & Lomb produces, develops, and markets a variety of eye-care products. (source: company press release or website)

Why We Like It:
There is no denying that investors can produce some sharp reactions to a company's earnings report. A strangle play can provide a great chance to capture any post-earnings volatility. If you look at shares of BOL is looks like the stock has been trading sideways while investors wait for the company's next earnings announcement, which is expected on July 27th before the market's opening bell. We are suggesting that readers open strangle plays in the $47.00-48.00 range, the closer to $47.50 the better. The goal is to open positions before the report on Thursday. At current prices our estimated cost is $2.15. Our goal will be to sell if either option rises to $3.25 or more. More aggressive traders may want to aim higher.

Suggested Options:
We are suggesting the August options for this strangle.

BUY CALL AUG 50.00 BOL-HJ open interest=2281 current ask $1.05
-and-
BUY PUT AUG 45.00 BOL-TI open interest=1682 current ask $1.10

Picked on July 23 at $ 47.40
Change since picked: + 0.00
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 2.2 million

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L-3 Comm. - LLL - close: 75.26 chg: +0.01 stop: n/a

Company Description:
Headquartered in New York City, L-3 Communications is a leading provider of Intelligence, Surveillance and Reconnaissance (ISR) systems, secure communications systems, aircraft modernization, training, and government services. The company is a leading merchant supplier of a broad array of high technology products, including guidance and navigation, sensors, scanners, fuzes, data links, propulsion systems, simulators, avionics, electro optics, satellite communications, electrical power equipment, encryption, intelligence systems, antennas, and microwave components. L-3 also supports a variety of Homeland Security initiatives with products and services. (source: company press release or website)

Why We Like It:
LLL did not move much on Friday. We suspect it's because investors are waiting for the company's earnings report due out this coming Thursday morning. Actually the stock has been trading sideways for several weeks and the next move, up or down, will probably be sparked by the company's earnings results and guidance. It is worth noting that while the weekly chart's technical indicators are hinting at a bullish move the weekly chart also shows that LLL has broken down under significant support and is just now retesting that support as new resistance. We want to try and capture any post-earnings volatility with a strangle play. We're suggesting readers open positions in the $74-76 range but the closer to $75.00 the better. At current prices our estimated cost is about $1.35. We will plan to sell if either option rises to $2.25 or more.

Suggested Options:
We're suggesting the August options.

BUY CALL AUG 80.00 LLL-HP open interest= 652 current ask $0.80
-and-
BUY PUT AUG 70.00 LLL-TN open interest= 252 current ask $0.55

Picked on July 23 at $ 75.26
Change since picked: + 0.00
Earnings Date 07/27/06 (confirmed)
Average Daily Volume = 1.2 million

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3M Co. - MMM - close: 70.72 change: -0.38 stop: n/a

Company Description:
Every day, 3M people find new ways to make amazing things happen. Wherever they are, whatever they do, the company's customers know they can rely on 3M to help make their lives better. 3M's brands include Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Command and Vikuiti. Serving customers in more than 200 countries around the world, the people of 3M use their expertise, technologies and global strength to lead in major markets including consumer and office; display and graphics; electronics and telecommunications; safety, security and protection services; health care; industrial and transportation. (source: company press release or website)

Why We Like It:
Shares of MMM have seen a dramatic rise and fall from $70 to $88 and back to $70 over the last six months. Now the stock sits precariously on long-term support at the $70 level as investors wait for the company's earnings report. We want to try and capture any post-earnings volatility with a strangle play. The company is due to report earnings on Tuesday morning, July 25th, before the market open. That only gives us one day to open positions. We're going to suggest a $71.50-69.00 entry range to open positions but the closer to $70 the better. At current prices our estimated cost is about $0.75. We are planning to exit if either options rises to $1.50 or more. FYI: It might be worth noting that Friday's dip under the $70 level has produced a new P&F chart sell signal with a $52 target.

Suggested Options:
We are suggesting the August options.

BUY CALL AUG 75.00 MMM-HO open interest=6774 current ask $0.45
-and-
BUY PUT AUG 65.00 MMM-TM open interest=1155 current ask $0.30

Picked on July 23 at $ 70.72
Change since picked: + 0.00
Earnings Date 07/25/06 (confirmed)
Average Daily Volume = 3.7 million

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Phelps Dodge - PD - close: 77.20 change: -0.77 stop: n/a

Company Description:
Phelps Dodge Corp. is one of the world's leading producers of copper. The company is a world leader in the production of molybdenum, and the largest producer of molybdenum-based chemicals and continuous-cast copper rod. The companys two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries, employ more than 13,500 people worldwide. (source: company press release or website)

Why We Like It:
High-flying shares of PD have lost some of their steam over the last couple of months. The stock has fallen into more of a sideways trading pattern with support near its rising 200-dma and resistance with its descending 50-dma. This coiling pattern of higher lows and lower highs will inevitably result in a breakout. The question is which way? Fortunately, with a strangle play we don't care which way the stock moves. What we care about is the strength of the move. Right now we suspect that investors are waiting for PD to report earnings on Wednesday, July 26th before the market's opening bell. Odds are this earnings report will spark the next move. At current prices our estimated cost is $2.15 with the August $85 call and August 70 put. We'll plan to sell if either option rises to $3.15 or more. Traders might also want to consider using the August 80 calls and the August 75 puts but it will cost about $5.05 to open plays.

Suggested Options:
We are suggesting the August options.

BUY CALL AUG 85.00 DPB-HQ open interest=32013 current ask $1.10
-and-
BUY PUT AUG 70.00 PT-TN open interest=12811 current ask $1.05

Picked on July 23 at $ 77.20
Change since picked: + 0.00
Earnings Date 07/26/06 (confirmed)
Average Daily Volume = 7.8 million
 

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