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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
DE FCX CAT
FMX WGII  
GWW    
RAIL    

New Calls

Deere & Co. - DE - close: 87.45 change: +2.61 stop: 83.99

Company Description:
John Deere (Deere & Company) is the worlds leading manufacturer of agricultural and forestry equipment; a leading supplier of equipment used in lawn, grounds, and turf care; a major manufacturer of construction equipment; and a major supplier of engines and drivetrain components for use in John Deere and other leading brands of equipment. (source: company press release or website)

Why We Like It:
DE produced a new bullish buy signal today. The stock bounced near its rising 50-dma and produced a bullish engulfing candlestick pattern. The rally today (+3%) also broke out over resistance at its 10-dma, 21-dma and its three-week trendline of resistance. Technical indicators are improving. We suspect that DE will rally into its November 21st earnings report. We're suggesting call positions here above $87.00. There is probably some resistance at its October high (90.47) but shares have more significant resistance near $92.00-92.50 from last May. We'll use a $91.50-92.00 target. We do not want to hold over the November earnings report.

Suggested Options:
We are suggesting the December calls.

BUY CALL DEC 85.00 DE-LQ open interest=7318 current ask $5.10
BUY CALL DEC 90.00 DE-LR open interest=5613 current ask $2.45

Picked on November 08 at $ 87.45
Change since picked: + 0.00
Earnings Date 11/21/06 (confirmed)
Average Daily Volume = 2.7 million

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Fomento Econo. - FMX - close: 102.09 chg: +1.81 stop: 97.99

Company Description:
FEMSA is the leading beverage company in Latin America. It controls an integrated beverage platform that comprises Coca-Cola FEMSA, the largest Coca- Cola bottler in the region; FEMSA Cerveza, one of the leading brewers in Mexico and important beer exporter to the United States; and Oxxo, the largest and fastest growing convenience store chain in Mexico with over 4,000 stores. (source: company press release or website)

Why We Like It:
The Mexican stock market touched a new high today and shares of FMX are not that far behind it. FMX rallied off its lows of the session to produce a bullish engulfing candlestick pattern and a 1.8% gain. Considering the pattern on FMX's daily chart there appears to be resistance in the $102.50-102.80 region but given the momentum in the Mexican market and in the U.S. market we suspect that FMX will breakout higher. The MACD on the daily chart just produced a new buy signal. We're suggesting bullish positions now with the stock above $100. More conservative traders may want to wait for a new relative high. We're going to start the play with a stop loss at $97.99 but more conservative traders may want to stick their stop under today's low (99.12). Our target is the $107.00-110.00 range.

Suggested Options:
We are suggesting the December calls.

BUY CALL DEC 100.00 FMX-LT open interest=65 current ask $5.00
BUY CALL DEC 105.00 FMX-LA open interest=30 current ask $2.45

Picked on November 08 at $102.09
Change since picked: + 0.00
Earnings Date 10/27/06 (confirmed)
Average Daily Volume = 314 thousand

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Grainger - GWW - close: 72.62 change: +0.77 stop: 69.99

Company Description:
W.W. Grainger, Inc., with 2005 sales of $5.5 billion, is a leading broad line supplier of facilities maintenance products serving businesses and institutions in Canada, China, Mexico and the United States. (source: company press release or website)

Why We Like It:
Shares of GWW are bouncing from the bottom of its rising, bullish channel in addition to bouncing near $70 and its 200-dma. Short-term technicals are improving and the P&F chart is bullish with an $80 target. We are suggesting call positions with the stock above $72.00. Our target is the $77.50-78.00 range. More conservative traders may want to exit early near $76, which might be resistance due to the July highs.

Suggested Options:
We are suggesting the January calls although Decembers would also work well.

BUY CALL JAN 70.00 GWW-AN open interest=676 current ask $4.70
BUY CALL JAN 75.00 GWW-AO open interest=443 current ask $1.90

Picked on November 08 at $ 72.62
Change since picked: + 0.00
Earnings Date 10/16/06 (confirmed)
Average Daily Volume = 687 thousand

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FreightCar Amer. - RAIL - close: 56.08 change: +1.89 stop: 53.49

Company Description:
FreightCar America, Inc. manufactures railroad freight cars, with particular expertise in coal-carrying railcars. In addition to coal cars, FreightCar America designs and builds flat cars, mill gondola cars, intermodal cars, coil steel cars and motor vehicle carriers. (source: company press release or website)

Why We Like It:
Transports and railroad stocks are on the rebound. Shares of RAIL displayed plenty of relative strength today with a 3.4% gain and a new six-week closing high. The breakout over its 50-dma and the $55 level in the last few days looks like a new bullish entry point as RAIL makes a run for resistance near $60.00. The P&F chart is optimistic with a $68 target. We're suggesting calls with RAIL above $55. Our target is the $59.75-60.00 range.

Suggested Options:
We are suggesting the December calls.

BUY CALL DEC 55.00 RQN-LK open interest=1454 current ask $3.50
BUY CALL DEC 60.00 RQN-LL open interest=1178 current ask $1.20

Picked on November 08 at $ 56.08
Change since picked: + 0.00
Earnings Date 10/26/06 (confirmed)
Average Daily Volume = 334 thousand
 

New Puts

Freeport McMoran - FCX - cls: 59.05 chg: -1.68 stop: 62.01

Company Description:
FCX explores for, develops, mines and processes ore containing copper, gold and silver in Indonesia, and smelts and refines copper concentrates in Spain and Indonesia. (source: company press release or website)

Why We Like It:
Yesterday copper producer Phelps Dodge (PD) hit a new all-time record high. Meanwhile shares of FCX were trying to breakout over resistance at the $62.00 level. Today both stocks were hit with profit taking and shares of FCX broke down under support at its 10-dma and bullish trend of higher lows. Technicals are turning bearish from overbought conditions. We're suggesting puts on FCX with the stock under $60.00. Given the stock's history we're going to suggest two targets. Our conservative target is the $55.25-55.00 range. Our aggressive target is the $51.00-50.00 range.

Suggested Options:
We are suggesting the December puts.

BUY PUT DEC 60.00 FCX-XL open interest=970 current ask $4.10
BUY PUT DEC 55.00 FCX-XK open interest=863 current ask $1.60

Picked on November 08 at $ 59.05
Change since picked: + 0.00
Earnings Date 10/17/06 (confirmed)
Average Daily Volume = 3.7 million

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Washington Group. - WGII - cls: 55.40 chg: -1.76 stop: 58.75

Company Description:
Washington Group International Inc. provides the talent, innovation, and proven performance to deliver integrated engineering, construction, and management solutions for businesses and governments worldwide. (source: company press release or website)

Why We Like It:
WGII recently reported earnings and the results were under analysts estimates and the company's guidance was mixed. Yet shares of WGII were already having trouble before the earnings report with a breakdown under its four-month bullish trend in late October. Today's 3% decline is a breakdown under support near $56.00 and its exponential 200-dma. The stock has already broken through its 50-dma, 100-dma and 200-dma. We're suggesting put positions now with the stock under $56.00. More conservative traders may want to wait for a decline under $55.00. A move under $55 would produce a new triple-bottom breakdown sell signal on the P&F chart. Our target is the $51.00-50.00 range.

Suggested Options:
We are suggesting the December puts.

BUY PUT DEC 60.00 QUG-XL open interest= 28 current ask $5.00
BUY PUT DEC 55.00 QUG-XK open interest=100 current ask $1.70
BUY PUT DEC 50.00 QUG-XJ open interest= 41 current ask $0.40

Picked on November 08 at $ 55.40
Change since picked: + 0.00
Earnings Date 11/06/06 (confirmed)
Average Daily Volume = 195 thousand
 

New Strangles

Caterpillar - CAT - close: 60.10 chg: +0.18 stop: n/a

Company Description:
For more than 80 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2005 sales and revenues of $36.339 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. (source: company press release or website)

Why We Like It:
The post-earnings sell-off and oversold bounce in CAT has dwindled into a sideways consolidation as the stock hugs the $60 level. Do you think CAT will move more than $5.00 before December options expire? We do. That's why we're suggesting a strangle on the stock here. Our preferred entry point is as close to $60.00 as possible but we'll suggest a $60.50-59.50 entry range to open plays.

Suggested Options:
A strangle involves buying both an out-of-the money call and an OTM put. Try and keep your investment on both sides as equal as possible to keep the strategy neutral. At current prices our estimated cost is about $0.75. We want to exit if either option rises to $1.50.

BUY CALL DEC 65.00 CAT-LM open interest=5128 current ask $0.45
-and-
BUY PUT DEC 55.00 CAT-XK open interest=2062 current ask $0.30

Picked on November 08 at $ 60.10
Change since picked: + 0.00
Earnings Date 01/19/06 (unconfirmed)
Average Daily Volume = 7.7 million
 

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