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Call Options Plays
Put Options Plays
Strangle Options Plays
None CHAP None
  LRCX  
  MDC  
  RYL  
  WHR  
  X  

New Calls

None today.
 

New Puts

Chaparral Steel Co. - CHAP - cls: 67.00 chg: -3.05 stop: 70.01

Company Description:
Chaparral Steel Company, headquartered in Midlothian, Texas, is the second largest producer of structural steel beams in North America. Chaparral is also a significant supplier of steel bar products. In addition, Chaparral is a leading North American recycling company. (source: company press release or website)

Why We Like It:
Steel and iron-related stocks, as a group, have been showing relative weakness lately. If investors are worried about an economic slow down in the U.S. and aboard then it makes sense to worry about such a basic industry group. Shares of CHAP have fared better than some of its peers but that strength may be coming to an end. The stock has struggled to breakout over resistance in the $74-76 region for the past few months. Now technicals are deteriorating and its Point & Figure chart has produced a new sell signal with a $60 price target. Aggressive traders may want to buy puts here. We're going to wait for a breakdown under its simple 100-dma. Our trigger to enter plays will be $65.40. More conservative traders may want to wait for a decline under $65.00 before initiating positions. Our short-term target will be the $60.50-60.00 range. Traders should note that CHAP is due to split 2-for-1 on September 5th. The stock split will not affect the fundamentals of our play. FYI: Another steel-related stock we're keeping an eye on as a potential put candidate is CRS.

Suggested Options:
We're suggesting the September puts. We do not want to hold over the late September earnings report. Our trigger is at $65.40.

BUY PUT SEP 70.00 ZHQ-UN open interest= 64 current ask $6.30
BUY PUT SEP 65.00 ZHQ-UM open interest=100 current ask $3.70
BUY PUT SEP 60.00 ZHQ-UL open interest= 53 current ask $1.90

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 09/20/06 (unconfirmed)
Average Daily Volume = 510 thousand

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Lam Research - LRCX - close: 39.04 change: -1.24 stop: 42.01

Company Description:
Lam Research Corporation is a major supplier of wafer fabrication equipment and services to the world's semiconductor industry. (source: company press release or website)

Why We Like It:
Several of the semiconductor stocks are looking vulnerable again. A few days ago shares of LRCX produced a failed rally/bearish reversal at the $42 level and its simple 200-dma. Now the stock looks poised to move lower from its sideways consolidation we've seen over the last few sessions. The P&F chart already points to a $34 target. We're suggesting that readers buy puts with LRCX under $40.00. More conservative traders may want to wait for a new decline under Friday's low near $38.60. Our target is the $35.25-35.00 range. FYI: Some traders might prefer to wait for the SOX semiconductor index to breakdown under the 400 level before considering put plays on LRCX. Currently the SOX is at 405.

Suggested Options:
We are suggesting the September puts.

BUY PUT SEP 40.00 LMQ-UH open interest=6149 current ask $2.55
BUY PUT SEP 35.00 LMQ-UG open interest=3086 current ask $0.75

Picked on August 13 at $ 39.04
Change since picked: + 0.00
Earnings Date 10/18/06 (unconfirmed)
Average Daily Volume = 3.0 million

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MDC Holdings - MDC - close: 42.46 change: -0.50 stop: 45.15

Company Description:
MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the top ten homebuilders in the United States, based on 2005 revenues. The Company also provides mortgage financing, primarily for MDC's homebuyers, through its wholly owned subsidiary HomeAmerican Mortgage Corporation. (source: company press release or website)

Why We Like It:
The homebuilders are looking weak again. The group has been crushed over the last several months. The housing market is cooling and there has been a large number of earnings warnings in the sector. We hesitate to even add a homebuilder as a put play because the group is so beat up. Yet it looks like MDC's recent oversold bounce has faded and now shares are poised to produce a new leg lower. We are going to suggest a trigger to buy puts at $42.25, which is under the July low. If triggered our target is the $38.00-37.50 range. We do expect a bounce at round-number, psychological support at the $40.00 level so be prepared for it. The P&F chart points to a $32 target.

Suggested Options:
We are suggesting the September puts. Our trigger is at $42.25.

BUY PUT SEP 45.00 MDC-UI open interest=1628 current ask $3.50
BUY PUT SEP 40.00 MDC-UH open interest= 578 current ask $1.05

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/19/06 (unconfirmed)
Average Daily Volume = 991 thousand

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Ryland Group - RYL - close: 40.00 chg: -0.78 stop: 42.05

Company Description:
With headquarters in Southern California, Ryland is one of the nation's largest homebuilders and a leading mortgage-finance company. The company currently operates in 28 markets across the country and has built more than 255,000 homes and financed more than 215,000 mortgages since its founding in 1967. (source: company press release or website)

Why We Like It:
RYL is another homebuilder that we think looks poised to turn lower. The oversold bounce stalled near $45.00 and now shares are clinging to the $40.00 level. Technical indicators are weak and suggesting a potential trip back toward the July lows. We're going to use a trigger at $39.40, which is under Thursday's low. If triggered our target is the $35.25-35.00 range.

Suggested Options:
We are suggesting the September puts. Our trigger is $39.40. You pick which strike price suits your trading style.

BUY PUT SEP 45.00 RYL-UI open interest= 394 current ask $5.60
BUY PUT SEP 42.50 RYL-UV open interest=1404 current ask $3.70
BUY PUT SEP 40.00 RYL-UH open interest=1795 current ask $2.15
BUY PUT SEP 37.50 RYL-UU open interest= 652 current ask $1.20
BUY PUT SEP 35.00 RYL-UG open interest= 240 current ask $0.60

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/18/06 (unconfirmed)
Average Daily Volume = 1.8 million

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Whirlpool - WHR - close: 76.06 chg: +0.61 stop: 76.26

Company Description:
Whirlpool Corporation is the world's leading manufacturer and marketer of major home appliances, with annual sales of more than $19 billion, more than 80,000 employees, and more than 60 manufacturing and technology research centers around the world. The company markets Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Brastemp, Bauknecht and other major brand names to consumers in nearly every country around the world. (source: company press release or website)

Why We Like It:
WHR produced a sharp rally higher in early August on news that it would be raising prices but the strength was short lived. After the Fed meeting investors began to worry about a slow down in the economy and new rate hikes in the future, which might cause a recession and would be bad news for WHR. Technicals are bearish but WHR is trying to bounce from the $74-75 region. If WHR trades under $74.00 it would produce a new quadruple bottom breakdown sell signal on its P&F chart. We're suggesting that readers use a trigger to buy puts at $73.99. If triggered our short-term target is the $70.10-70.00 range.

Suggested Options:
We are suggesting the September and October puts. Our trigger is at $73.99.

BUY PUT SEP 75.00 WHR-UO open interest=3507 current ask $2.45
BUY PUT SEP 70.00 WHR-UN open interest= 882 current ask $0.95

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume = 1.2 million

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United States Steel - X - cls: 56.44 chg: -2.78 stop: 60.05

Company Description:
United States Steel Corporation headquartered in Pittsburgh, Pa., manufactures a wide variety of steel sheet, tubular and tin products; coke, and taconite pellets; and has a worldwide annual raw steel capability of 26.8 million net tons. (source: company press release or website)

Why We Like It:
X is another iron and steel-related stock that looks poised for more weakness. Shares are already trading in a bearish trend of lower highs and Friday's decline saw X breakdown under technical support at its simple 200-dma. The P&F chart is already bearish and points to a $49 target. We want to see shares of X break down under support at the $56.00 level before initiating positions. Our trigger to buy puts is at $55.85. If triggered our target is the $50.25-50.00 range.

Suggested Options:
We are suggesting the September puts. Our trigger is at $55.85.

BUY PUT SEP 60.00 X-UL open interest=1497 current ask $5.40
BUY PUT SEP 55.00 X-UK open interest=1561 current ask $2.65
BUY PUT SEP 50.00 X-UJ open interest=1558 current ask $1.05

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume = 5.7 million
 

New Strangles

None today.
 

New Play Archives