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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
CHAP None None
FXI    
LFC    
TFX    

New Calls

Chaparral Steel - CHAP - cls: 45.16 chg: +1.33 stop: 41.99

Company Description:
Chaparral Steel Company, headquartered in Midlothian, Texas, is the second largest producer of structural steel beams in North America. The Company is also a supplier of steel bar products. In addition, Chaparral is a leading North American recycling company. (source: company press release or website)

Why We Like It:
After selling off from their December highs it looks like steel-related stocks are making a comeback. CHAP has put in a double-bottom near the $42.00 level and short-term technical indicators are improving. We see Friday's breakout over $44.00, its 50-dma and the $45.00 level as a new entry point to buy calls. Our target is the $49.00-50.00 range.

Suggested Options:
We are suggesting the February calls.

BUY CALL FEB 40.00 ZHQ-BH open interest=115 current ask $6.00
BUY CALL FEB 45.00 ZHQ-BI open interest=404 current ask $2.45
BUY CALL FEB 50.00 ZHQ-BJ open interest=441 current ask $0.65

Picked on January 14 at $ 45.16
Change since picked: + 0.00
Earnings Date 03/20/07 (unconfirmed)
Average Daily Volume = 635 thousand

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iShares China Index - FXI - close: 105.40 chg: +2.40 stop: 99.49

Company Description:
The FXI is an iShares trust that tracks the FTSE/Xinhua China 25 index. The fund investors "at least 90% of its assets" in ADRs, GDR, or EDRs representing the index. (source: Yahoo.com)

Why We Like It:
Anyone looking at the weekly chart (or even the daily) of the FXI can see that this index is very overbought and due for a correction. However, it looks like the FXI just suffered one with a twenty-point drop from its highs (about 20%). Traders bought the bounce on Wednesday above its rising 50-dma. The pull back in the FXI mirrored a pull back in the Chinese market but now we're seeing a widespread rebound. This play is intended as a short-term attempt to catch the bounce. We'll stick our stop loss at $99.49 and aim for the $115.00-117.00 range. Be prepared for a gap open (up or down) every day as the FXI reacts to what happens overnight in the Chinese markets.

Suggested Options:
We are suggesting the February calls. You, the individual trader, should decide which month and which strike price best suits your trading style and risk.

BUY CALL FEB 100 FJJ-BT open interest= 483 current ask $8.40
BUY CALL FEB 101 FJJ-BW open interest= 131 current ask $7.90
BUY CALL FEB 102 FJJ-BX open interest= 120 current ask $7.30
BUY CALL FEB 103 FJJ-BY open interest= 122 current ask $6.70
BUY CALL FEB 104 FJJ-BZ open interest= 414 current ask $5.90
BUY CALL FEB 105 FJJ-BA open interest=1423 current ask $5.50
BUY CALL FEB 106 FJJ-BB open interest= 269 current ask $5.00
BUY CALL FEB 107 FJJ-BC open interest= 416 current ask $4.50
BUY CALL FEB 108 FJJ-BD open interest= 307 current ask $4.00
BUY CALL FEB 109 FJJ-BE open interest= 101 current ask $3.60
BUY CALL FEB 110 FJJ-BF open interest=1540 current ask $3.10

Picked on January 14 at $105.40
Change since picked: + 0.00
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 1.3 million

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China Life Ins. - LFC - close: 46.86 change: +1.41 stop: 43.95

Company Description:
China Life Insurance Company Limited sells individual life insurance and annuity products. (source: Yahoo.com)

Why We Like It:
LFC is another hot Chinese stock that was a real momentum mover last year. When the calendar rolled over to 2007 LFC suffered a serious bout of profit taking with a drop from $57.85 toward the $44 level. The sell-off has produced a very bearish P&F chart. However, we're seeing a widespread rebound in many of the Chinese stocks and LFC could easily bounce back. There is potential resistance near $50.00 and its 10-dma. Plus the stock tends to gap open every morning. Due to LFC still being overbought and due to its nature as an overseas equity readers should consider this a higher-risk, more aggressive trade. Our target is the $52.50-55.00 range.

Suggested Options:
We are suggesting the February calls.

BUY CALL FEB 45.00 LFC-BI open interest=1017 current ask $4.20
BUY CALL FEB 50.00 LFC-BJ open interest=2611 current ask $2.10

Picked on January 14 at $ 46.86
Change since picked: + 0.00
Earnings Date 04/18/07 (unconfirmed)
Average Daily Volume = 1.7 million

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Teleflex - TFX - close: 67.11 chg: +0.91 stop: 64.75

Company Description:
Teleflex Incorporated is a diversified company with revenues of $2.5 billion in 2005. Teleflex designs, manufactures and distributes quality-engineered products and services for the automotive, medical, aerospace, marine and industrial markets worldwide. Headquartered in Limerick, Pa., with operations in 24 countries, Teleflex employs more than 20,000 people worldwide who focus on providing innovative solutions for customers. (source: company press release or website)

Why We Like It:
We normally don't play stocks that have an average daily volume under 250-300,000 shares a day. We're tempted to buy calls on TFX because shares are breaking out from a seven-week consolidation phase. Volume could have been a lot more convincing on last week's breakout higher so we're going to try and keep the stop loss close. More aggressive traders may want to put their stop under the 50-dma. Readers can choose to go long calls now or wait for a potential dip back toward $66.00-65.50. Normally we would expect the $70.00 level to act as resistance but looking at TFX's history the stock seems to encounter resistance in the $72.00 region. Our target will be the $71.00-72.00 range.

Suggested Options:
We're suggesting the February calls.

BUY CALL FEB 65.00 TFX-BM open interest= 22 current ask $3.20
BUY CALL FEB 70.00 TFX-BN open interest= 10 current ask $0.60

Picked on January 14 at $ 67.11
Change since picked: + 0.00
Earnings Date 02/14/07 (unconfirmed)
Average Daily Volume = 202 thousand
 

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