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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
CERN None BSC
CI    

New Calls

Cerner Corp. - CERN - close: 46.95 chg: +1.45 stop: 46.45

Company Description:
Cerner Corp. is taking the paper chart out of healthcare, eliminating error, variance and waste in the care process. With more than 1,500 clients worldwide, Cerner is the leading supplier of healthcare information technology. (source: company press release or website)

Why We Like It:
CERN reported earnings last Thursday after the closing bell. The results were better than expected and Friday's session saw the stock produce a big rally from its lows of the day. The move produced a new bullish engulfing candlestick pattern. If CERN sees any follow through higher next week the stock might breakout through the top of its ten-week $44-48 trading range. We're suggesting that readers use a trigger to buy calls at $48.05. If triggered then our target is the $52.00-52.50 range. The $50.00 mark might offer some round-number resistance so expect a pull back on the initial test of $50. FYI: The Point & Figure chart projects a $76 target.

Suggested Options:
We are suggesting the November and December calls. You, the individual trader, should decide which month and strike price best suits your trading style and risk. Our entry point is $48.05.

BUY CALL NOV 45.00 CQN-KI open interest=169 current ask $3.00
BUY CALL NOV 47.50 CQN-KW open interest=561 current ask $1.35
BUY CALL NOV 50.00 CQN-KJ open interest=551 current ask $0.50

BUY CALL DEC 45.00 CQN-LI open interest=485 current ask $3.70
BUY CALL DEC 47.50 CQN-LW open interest=378 current ask $2.15
BUY CALL DEC 50.00 CQN-LJ open interest=286 current ask $1.10

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/19/06 (confirmed)
Average Daily Volume = 662 thousand

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CIGNA - CI - close: 119.90 change: +0.57 stop: 117.75

Company Description:
CIGNA Corporation and its subsidiaries constitute one of the largest publicly owned health and related benefits organizations in the United States. Its subsidiaries are major providers of employee benefits offered through the workplace, including health care products and services and group life, accident and disability insurance products. (source: company press release or website)

Why We Like It:
We are going to try again with CI. We recently had the stock on the newsletters as a bullish candidate but shares never broke out over resistance at $120 and never hit our trigger to open positions. Now the stock has rebounded from the $116 level and actually managed to trade over resistance at $120 on an intraday basis this past Friday. We only have a few days. The company is due to report earnings on November 1st and we do not want to hold over the report. However, if CI does breakout it could spark a significant move. We are suggesting a trigger to buy calls at $120.25. If triggered our short-term target is the $125.00-127.00 range. We're setting our stop at $117.75. More aggressive traders may want to put their stop under $116.

Suggested Options:
We are suggesting the November calls. Our trigger is at $120.25.

BUY CALL NOV 115 CI-KC open interest= 579 current ask $8.40
BUY CALL NOV 120 CI-KD open interest= 794 current ask $5.20
BUY CALL NOV 125 CI-KE open interest=1034 current ask $2.85

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/01/06 (confirmed)
Average Daily Volume = 1.3 million

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New Puts

None Today.

New Strangles

Bear Stearns - BSC - cls: 150.19 chg: -0.24 stop: n/a

Company Description:
Founded in 1923, The Bear Stearns Companies Inc. is the parent company of Bear, Stearns & Co. Inc., a leading investment banking, securities trading, clearing and brokerage firm. With approximately $61.9 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. Headquartered in New York City, the company has approximately 13,000 employees worldwide. (source: company press release or website)

Why We Like It:
The broker-dealers have been a huge pocket of strength for the markets over the last several weeks. BSC has run from its September lows near $127 to its recent all-time highs around $153. Needless to say the stock looks overbought and due for a correction. The MACD on the daily chart for BSC is nearing a new sell signal. It looks like the correction has already begun in the XBD broker-dealer index. It would be tempting to try and speculate with puts on BSC but the bullish trend is still intact for the stock and the major market indices. Thus we're suggesting a strangle to try and capture any further move in the stock. At today's prices our estimated cost for this play is about $4.00. We want to exit if either option rises to $6.00 or more. Try and open positions in the $149.00-151.00 entry range. The closer to $150.00 the better.

Suggested Options:
A strangle involves buying both an out-of-the money (OTM) call and an OTM put.

BUY CALL NOV 155 BSC-KK open interest= 969 current ask $2.05
-and-
BUY PUT NOV 145 BSC-WI open interest= 754 current ask $1.95

Picked on October 22 at $150.19
Change since picked: + 0.00
Earnings Date 12/14/06 (unconfirmed)
Average Daily Volume = 1.6 million

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