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New Plays

New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
ERF ESS None
GD    
PBR    
RIMM    

Play Editor's Note: The market's sell-off on Monday failed to break the rising bullish channel for the S&P 500 and the NASDAQ. Lack of follow through lower today suggests that we can buy this dip inside its bullish trend. We chose to add some new plays to the newsletter but we continue to suggest caution about adding new bullish positions.


New Calls

Enerplus - ERF - close: 45.41 change: +0.90 stop: 43.85

Company Description:
Enerplus Resources Fund is a publicly traded energy income trust based in Calgary. The company is involved in crude oil, natural gas and the oil sands of Canada.

Why We Like It:
It has been a rocky couple of months for ERF. It looked like shares were on the way to recovery in late October. Then without warning the stock gapped down as investors reacted to news that the Canadian government had issued a new proposal to tax publicly traded income trust in Canada. This proposal, if approved, would not take effect until 2011. The initial reaction has worn off and shares of ERF on rebounding again. The stock's long-term up trend has been broken and shares now appear to be trading in a wide, descending channel over the last three months. We suspect that ERF can trade back toward the top of the channel in the $50-51 region. More aggressive traders might want to consider long positions now with today's rise over $45.00. We're going to suggest a trigger to buy calls at $46.01. If triggered our target is the $50.00-51.00 range. FYI: The P&F chart for ERF is still bearish but it's trying to make a comeback.

Suggested Options:
We are suggesting the January calls. Our suggested trigger to open plays is at $46.01.

BUY CALL JAN 40.00 ERF-AH open interest= 833 current ask $5.70
BUY CALL JAN 45.00 ERF-AI open interest=4309 current ask $2.10
BUY CALL JAN 50.00 ERF-AJ open interest=2336 current ask $0.60

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/10/06 (confirmed)
Average Daily Volume = 973 thousand

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General Dynamics - GD - cls: 73.54 chg: +0.98 stop: 71.90

Company Description:
General Dynamics, headquartered in Falls Church, Va., employs approximately 81,100 people worldwide and expects 2006 revenues of approximately $24 billion. The company is a market leader in mission-critical information systems and technologies; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and business aviation. (source: company press release or website)

Why We Like It:
Defense stocks produced a decent bounce on Tuesday. Shares of GD rebounded from the $72.00 level. If you look at GD's charts the recent consolidation looks like a bull flag pattern. Aggressive traders might want to consider positions now. We want to see the breakout from the flag pattern first so we're suggesting a trigger to buy calls at $74.35. More conservative traders may want to wait for a new relative high over $75.15 before opening new plays. The P&F chart points to an $82 target. If we are triggered at $74.35 our target will be the $78.00-80.00 range.

Suggested Options:
We are suggesting the January calls. Our suggested trigger to open plays is at $74.35.

BUY CALL JAN 70.00 GD-AN open interest=7701 current ask $4.80
BUY CALL JAN 75.00 GD-AO open interest=9141 current ask $1.60
BUY CALL JAN 80.00 GD-AP open interest=2946 current ask $0.25

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/24/07 (unconfirmed)
Average Daily Volume = 1.4 million

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Petroleo Brasileiro - PBR - cls: 90.61 chg: +1.53 stop: 87.99

Company Description:
We are Petrobras, Brazil's largest energy company. Currently have 97 production platforms (73 fixed and 24 floating) producing, in 2005, more than 2,0 million barrels of oil equivalent , and 16 refineries, with a nominal installed capacity of 2.1 million barrels a day. We also have 30,343 kilometers of pipelines and 6.933 service stations throughout the national territory. Seven hundred sixty three (763) of these stations are self-owned, so wherever you go, whether in Brazil or abroad, you will find Petrobras. We are now present in 23 countries. (source: company press release or website)

Why We Like It:
PBR is still trading with a bullish pattern of higher lows. However, that is in contrast to the more short-term trend of lower highs over the last couple of weeks. We suspect that PBR is poised to breakout and begin a new leg higher. Helping the bullish is a bullish Brazilian stock market and rising crude oil futures. We're going to suggest a trigger to buy calls at $91.51. More aggressive traders might want to jump in now. Conservative traders may want to set their trigger above $92 or above $94. Our target is the $98-100 range. Currently the P&F chart points to a $104 target.

Suggested Options:
We are suggesting the January calls. Our trigger to open plays is at $91.51.

BUY CALL JAN 90.00 PBR-AR open interest=8662 current ask $4.50
BUY CALL JAN 95.00 PBR-AS open interest=5789 current ask $2.15

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/06 (unconfirmed)
Average Daily Volume = 2.6 million

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Research In Motion - RIMM - cls: 134.29 chg: -1.01 stop: 129.99

Company Description:
Research in Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. (source: company press release or website)

Why We Like It:
This is an aggressive, high-risk play. Shares of RIMM look very overbought and due for a more prolonged consolidation to digest its $60 to $140 run over the past few months. However, the sell-off yesterday in the major averages did not break the rising channels and the pull back in RIMM has not broken its bullish trend either. The stock did gap down this morning after one analyst firm cut their rating to a "market perform" due to valuation concerns. Meanwhile, on the plus side, rival PALM was crushed for a 7.6% loss after announcing an earnings warning. Turning back to RIMM, we see the bounce from the $130.00 level as an aggressive entry point to buy the dip. We'll put our stop under $130 and aim for the recent highs at $142. More aggressive traders may want to aim higher thanks to RIMM's amazing momentum.

Suggested Options:
We are suggesting the January calls. We do not want to hold over the December earnings report.

BUY CALL JAN 130 RUP-AF open interest=10444 current ask $12.40
BUY CALL JAN 135 RUP-AG open interest= 2305 current ask $ 9.60
BUY CALL JAN 140 RFY-AH open interest= 4787 current ask $ 7.40
*please note the root symbol changed at the $140 strike

Picked on November 28 at $134.29
Change since picked: + 0.00
Earnings Date 12/21/06 (unconfirmed)
Average Daily Volume = 7.2 million
 

New Puts

Essex Property Trust - ESS - cls: 127.50 chg: -1.03 stop: 130.01

Company Description:
Essex Property Trust, Inc., located in Palo Alto, California and traded on the New York Stock Exchange (ESS), is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast communities. Essex currently has ownership interests in 129 multifamily properties (27,520 units), and has 551 units in various stages of development. (source: company press release or website)

Why We Like It:
REITs have been popular with investors lately. ESS has certainly delivered over the last few years. In spite of this long-term bullish trend we're seeing some very definite bearish signs that the stock may be due for a consolidation lower. The easiest bearish signal to spot is the double-top pattern formed over the last month. Next would be the bearish technical indicators. Following that is the bearish divergence between price and some of its technical indicators. We want to be ready if ESS does break its bullish trend. Aggressive traders might want to jump the gun with an entry under $126.00. We noticed that ESS bounced from $125 about three weeks ago so we're suggesting a trigger to buy puts at $124.90. If triggered we will have two targets. Our first target is the $120.50-120.00 range. Our second, more aggressive target will be the $116.50-115.00 range. FYI: The P&F chart remains bullish (for now).

Suggested Options:
We are suggesting the January puts. Our suggested trigger to open plays is at $124.90.

BUY PUT JAN 130 ESS-MF open interest= 0 current ask $6.80
BUY PUT JAN 125 ESS-ME open interest=10 current ask $5.00
BUY PUT JAN 120 ESS-MD open interest=78 current ask $?.??

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/01/06 (confirmed)
Average Daily Volume = 147 thousand
 

New Strangles

None today.
 

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