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Call Options Plays
Put Options Plays
Strangle Options Plays
None AMD CEPH
  AMZN NILE
  PCAR WFMI
  PTRY  

New Calls

None today.
 

New Puts

Advanced Micro Dev. - AMD - cls: 20.86 chg: -0.64 stop: 22.05

Company Description:
Advanced Micro Devices is a leading global provider of innovative processing solutions in the computing, graphics and consumer electronics markets. AMD is dedicated to driving open innovation, choice and industry growth by delivering superior customer-centric solutions that empower consumers and businesses worldwide. (source: company press release or website)

Why We Like It:
AMD reported earnings on October 18th and beat estimates by 4 cents but the stock sold off any way due to disappointing gross margins. AMD bounced from round-number psychological support at $20.00 but that bounce appears to be failing under the $22.00 level and its descending 10-dma. We see Friday's failed rally under the 10-dma as a new entry point to buy puts. The semiconductor SOX index has been under performing the broader market over the past couple of weeks and after Friday's comments from Goldman Sachs about plunging motherboard sales we expect that the chips will continue to see weakness. We admit that this is probably an aggressive entry point with tested support at the $20.00 level and more conservative traders may want to wait for a decline under $20.00 before considering new put positions. We do note that most of AMD's gaps tend to get filled but we're expecting some market weakness in early November that could weigh on the stock and the sector. Our target is the $17.50-17.00 range.

Suggested Options:
We are suggesting the December puts. Novembers only have three weeks left.

BUY PUT DEC 22.50 AMD-XU open interest= 768 current ask $2.40
BUY PUT DEC 20.00 AMD-XD open interest=2662 current ask $1.00
BUY PUT DEC 17.50 AMD-XW open interest= 757 current ask $0.30

Picked on October 29 at $ 20.86
Change since picked: - 0.00
Earnings Date 10/18/06 (confirmed)
Average Daily Volume = 23.0 million

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Amazon.com - AMZN - close: 38.24 chg: -0.06 stop: 40.25

Company Description:
Amazon.com, Inc., a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com, Inc. seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. (source: company press release or website)

Why We Like It:
We want to warn readers right from the start that this is a speculative play. Shares of AMZN soared on October 25th following a better than expected earnings report from the company. AMZN beat estimates, came in higher on the revenue numbers and guided higher for the fourth quarter. The news produced a short squeeze that may not be over yet. The most recent (early October) data put short interest at over 14% of AMZN's float. While the earnings news was very positive we suspect that AMZN will "fill the gap". The post-earnings rally stalled just under resistance at the $39.00 level (see chart). There is additional resistance near $40.00. We're suggesting put positions now but we need to allow room for AMZN to trade near $40 is necessary. More patient traders may want to try and time an entry on another failed rally near $39 or if the rally continues then near $40. Our target is the $35.00-34.00 range.

Suggested Options:
We are suggesting the December puts.

BUY PUT DEC 40.00 ZQN-XH open interest= 517 current ask $2.75
BUY PUT DEC 37.50 ZQN-XU open interest=3109 current ask $1.50
BUY PUT DEC 35.00 ZQN-XG open interest=2035 current ask $0.75

Picked on October 29 at $ 38.24
Change since picked: + 0.00
Earnings Date 10/24/06 (confirmed)
Average Daily Volume = 7.9 million

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PACCAR Inc. - PCAR - cls: 59.42 chg: -0.70 stop: 62.51

Company Description:
PACCAR is a global technology leader in the design, manufacture and customer support of high-quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. It also provides financial services and information technology and distributes truck parts related to its principal business. (source: company press release or website)

Why We Like It:
PCAR reported earnings this past week and managed to beat analyst estimates but the stock responded with a failed rally at $62.50, the second one in a two-day time period. Since the earnings report shares of PCAR have continued to slide lower and now the daily chart's MACD indicator has produced a new sell signal. The close under the $60.00 level is also bearish. We're suggesting puts with PCAR under $60.00. Our target is the rising 100-dma but we're going to use an official exit in the $56.00-55.50 range (for now). We are using a wide stop loss but more conservative traders may want to try and keep theirs near $61.00 to reduce their risk.

Suggested Options:
We are suggesting the December puts.

BUY PUT DEC 60.00 PAQ-XL open interest=270 current ask $3.10
BUY PUT DEC 55.00 PAQ-XK open interest= 49 current ask $1.00

Picked on October 29 at $ 59.42
Change since picked: + 0.00
Earnings Date 10/24/06 (confirmed)
Average Daily Volume = 1.4 million

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Pantry Inc. - PTRY - close: 54.05 change: -1.35 stop: 57.05

Company Description:
Headquartered in Sanford, North Carolina, The Pantry, Inc. is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country, with net sales for fiscal 2005 of approximately $4.4 billion. As of September 28, 2006, the Company operated 1,493 stores in eleven states under select banners, including Kangaroo Express(SM), our primary operating banner. (source: company press release or website)

Why We Like It:
Shares of PTRY spent over a week in October trying to breakout over resistance at the $60.00 level. The stock eventually produced a "breakout" but the direction was down. The company pre-announced that earnings would come in below analyst expectations and naturally the markets sent the stock lower. The oversold bounce from its 50-dma and 100-dma is already fading and we expect the next move to be lower. However, this is an aggressive entry point since PTRY is likely to have support in the $53.00-52.50 region. We're suggesting put positions now with PTRY under $55.00 but more conservative traders may want to wait for a decline under $52.50 before opening new put plays. Conservative traders may also want to consider a tighter stop (maybe near $56.00). Our target is the $48.00-47.00 range. We do not want to hold over the November 16th earnings report.

Suggested Options:
We are suggesting the December puts.

BUY PUT DEC 55.00 PQR-XK open interest= 77 current ask $3.60
BUY PUT DEC 50.00 PQR-XJ open interest=155 current ask $1.60

Picked on October 29 at $ 54.05
Change since picked: + 0.00
Earnings Date 11/16/06 (confirmed)
Average Daily Volume = 383 thousand
 

New Strangles

Cephalon - CEPH - close: 69.35 change: -0.87 stop: n/a

Company Description:
Founded in 1987, Cephalon, Inc. is an international biopharmaceutical company dedicated to the discovery, development and marketing of innovative products in four core therapeutic areas: central nervous system, pain, oncology and addiction. Cephalon currently employs approximately 3,000 people in the United States and Europe. (source: company press release or website)

Why We Like It:
Earnings for CEPH are coming up on Thursday, November 2nd. Shares have been consolidating sideways near the $70.00 level for the past few days and now the stock looks like a good candidate for a strangle play. CEPH looks pretty overbought from its bounce near $55.00 in late September and while the technicals are turning bearish there is no way to know what direction the stock will move on the earnings news. That's why we're suggesting strangles in the $69.00-71.00 range. The closer to $70.00 we can open the position the better. We do not want to open plays after the earnings report.

Suggested Options:
A strangle involves buying both an out-of-the-money call and an OTM put. At current prices our estimated cost is $3.45. We plan to see if either option rises to $4.90 or more.

BUY CALL DEC 75.00 CQE-LO open interest=118 current ask $1.55
-and-
BUY PUT DEC 65.00 CQE-XM open interest=469 current ask $1.90

Picked on October 29 at $ 69.35
Change since picked: + 0.00
Earnings Date 11/02/06 (confirmed)
Average Daily Volume = 2.0 million

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Blue Nile - NILE - cls: 38.92 chg: -0.60 stop: n/a

Company Description:
Founded in 1999, Blue Nile is the leading online retailer of diamonds and fine jewelry. It has built a well respected brand by providing consumers with a better way to buy diamonds and fine jewelry. (source: company press release or website)

Why We Like It:
NILE spent weeks consolidating sideways between $35 and $38 but last week the stock broke out higher. This could be the beginning of a new leg higher. However everything could change after the company's earnings report. NILE is due to report earnings on Monday, October 30th after the closing bell. That gives us one day to open positions. The stock has a history of big moves following the company's earnings reports so a strangle seems like a good bet here. You'll notice that NILE isn't trading near any one specific strike price so traders will need to take extra care to try and balance the amount invested (not the number of contracts) on both the call side and put side to keep this strategy neutral. We're suggesting entries in the $38.00-41.00 range. We do not want to open plays after the earnings report on Monday night.

Suggested Options:
A strangle involves buying both an out-of-the-money call and an OTM put. At current prices our estimated cost is $2.40. We plan to see if either option rises to $3.90 or more.

BUY CALL JAN 45.00 JWU-AI open interest= 284 current ask $0.85
-and-
BUY PUT JAN 35.00 JWU-MG open interest=1388 current ask $1.55

Picked on October 29 at $ 38.92
Change since picked: + 0.00
Earnings Date 10/30/06 (confirmed)
Average Daily Volume = 226 thousand

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Whole Foods - WFMI - close: 64.75 change: -0.65 stop: n/a

Company Description:
Founded in 1980 in Austin, Texas, Whole Foods Market is a Fortune 500 company and the largest natural and organic foods retailer. The Company had sales of $4.7 billion in fiscal year 2005 and currently has 186 stores in the United States, Canada and the United Kingdom. (source: company press release or website)

Why We Like It:
After an impressive run up shares of WFMI have been consolidating sideways the past two weeks as investors wait for the company's next earnings report. The last couple of earnings reports produced some strong moves in the stock price and we want to use a strangle to capture any move. The company is expected to report earnings on Thursday, November 2nd after the market's close. We would not open positions after they announce. We're suggesting a $64.00-66.00 entry range to open positions with our preferred entry point as close to $65 as possible.

Suggested Options:
A strangle involves buying both an out-of-the-money call and an OTM put. At current prices our estimated cost is $3.15. We plan to see if either option rises to $5.40 or more.

BUY CALL DEC 70.00 FMQ-LN open interest=195 current ask $1.60
-and-
BUY PUT DEC 60.00 FMQ-XL open interest=147 current ask $1.55

Picked on October 29 at $ 64.75
Change since picked: + 0.00
Earnings Date 11/02/06 (confirmed)
Average Daily Volume = 2.1 million
 

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