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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
PCU EOG None
PD    

New Calls

Southern Peru Copper - PCU - close: 92.32 chg: +2.50 stop: 88.99

Company Description:
Our mining operations are located in Peru and Mexico. We own and operate four open pit mines and three metallurgical complexes that make SCC a fully integrated copper producer with significant byproducts of molybdenum, zinc and precious metals. (source: company press release or website)

Why We Like It:
Copper miners are on the move today. The price of copper itself was moving higher on news that a labor strike in Chile might be ending soon. Meanwhile news of a merger between gold miners GG and GLG also contributed to strength in the mining sector. Shares of PCU are in the process of breaking out from a three-week sideways consolidation pattern. The new relative high today actually produced a new triple-top ascending buy signal on the P&F chart. We are suggesting new call positions in PCU with the stock above $91.00 although more conservative traders may want to wait for a new move over $93.10 (Thursday's high). Our target is the $98.00-100.00 range. Please note that we're also adding PD, another copper mining stock, to the play list. We would suggest you choose to play just one not both stocks in the same sector.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 90.00 PCU-JR open interest=355 current ask $6.90
BUY CALL OCT 95.00 PCU-JS open interest=319 current ask $4.50

Picked on August 31 at $ 92.32
Change since picked: + 0.00
Earnings Date 07/26/06 (confirmed)
Average Daily Volume = 1.5 million

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Phelps Dodge - PD - close: 89.50 change: +2.03 stop: 86.75

Company Description:
Phelps Dodge is one of the world's leading producers of copper and molybdenum and is the largest producer of molybdenum-based chemicals and continuous-cast copper rod. The company employs 14,500 people worldwide. (source: company press release or website)

Why We Like It:
We are adding PD for the same reasons we're adding PCU (see play above). The stock is moving higher on a rise in the commodity, which is rallying on news that a labor strike in Chile may be ending soon. The M&A activity between two gold miners today also contributed to bullish sentiment. Technicals are improving with the bounce this past week but we want to see a breakout over $90.00 first before we open plays. We're suggesting that traders use a trigger to buy calls at $90.55. If triggered our target is the $97.50-100.00 range. Please note that we're also adding PCU, another copper mining stock, to the play list. We would suggest you choose to play just one not both stocks in the same sector.

Suggested Options:
We are suggesting the October calls. Just a reminder - you, the individual trader, should decide which month and strike price best suits your trading style and risk.

BUY CALL OCT 85.00 DPB-JQ open interest=17872 current ask $8.40
BUY CALL OCT 87.50 DBP-JY open interest= 6936 current ask $6.90
BUY CALL OCT 90.00 DBP-JR open interest=13909 current ask $5.60
BUY CALL OCT 95.00 DBP-JS open interest=12326 current ask $3.30

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume = 6.7 million
 

New Puts

EOG Resources - EOG - close: 64.82 chg: -0.37 stop: 66.55

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 testing significant support. The end of the summer driving season, the technical breakdown in crude oil, is weighing on the oil sector. The recent weakness has pulled EOG down to a pivotal level. EOG has found support near $64.00 over the last two months, which coincidentally is now bolstered by a rising trendline of support on the stock's Point & Figure chart. Trading over the last several weeks has also produced a bearish head-and-shoulders pattern with the neckline at the $64.00 level. If EOG breaks under $64.00 it would also produce a triple-bottom breakdown sell signal on the P&F chart. We want to catch the breakdown so we're suggesting a trigger to buy puts at $63.85. Our target is the $57.50-55.00 range. The biggest risk we see with this play is the situation with Iran. The country has defied the U.N.'s demand to stop enriching uranium. The next move by the U.N. is supposed to be sanctions. We do not know how the world, the markets, Iran and more importantly crude oil prices will react to sanctions actually being applied. The rhetoric that is sure to come from Iran if sanctions are used could push oil higher, which would be risky for a put play on any oil stock. Furthermore, if there is any military action against Iran (and probably coming out of Iran) then oil should significantly spike higher, which again would put this play in danger!

Suggested Options:
We are suggesting the October puts.

BUY PUT OCT 65.00 EOG-VM open interest=4595 current ask $3.70
BUY PUT OCT 60.00 EOG-VL open interest=6433 current ask $1.80

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/31/06 (unconfirmed)
Average Daily Volume = 3.4 million
 

New Strangles

None today.
 

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