Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
AH AVB None
CTRP BAB  
GD CRDN  

New Calls

Play Editor's Note: The markets have been very bullish but they have become overbought and due for a correction. That doesn't mean they can't become more overbought before pulling back. Our concern is that the peak of earnings season has just passed and we're nearing the end of April. That means we'll start hearing more about the "sell in May and go away" theory. The trend is still up but we would be very careful about opening new positions at this time. We are adding new stocks to the newsletter but be extra careful about jumping in.

---

Armor Holdings - AH - cls: 70.81 chg: +1.30 stop: 68.99

Company Description:
Armor Holdings, Inc. is a diversified manufacturer of branded products for the military, law enforcement, and personnel safety markets. (source: company press release or website)

Why We Like It:
Defense stocks are a bright spot in the market. The DFI index rose to a new all-time high on Friday. Shares of AH have definitely enjoyed some strong gains this year. Friday's move in AH looks like a potential entry point with its bullish engulfing candlestick pattern. However, we would like to see AH breakout from its current two-week trading range. More aggressive traders may want to open positions now. We are suggesting a trigger to buy calls at $71.51. If triggered we will have two targets. Our conservative target is $74.75-75.00. Our aggressive target will be $77.50-80.00. The P&F chart is bullish and points to a $73 target.

Suggested Options:
We are suggesting the June calls. May calls expire in three weeks.

BUY CALL JUN 70.00 AH-FN open interest=1027 current ask $3.80
BUY CALL JUN 75.00 AH-FO open interest=2092 current ask $1.80

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/19/07 (confirmed)
Average Daily Volume = 482 thousand

---

Ctrip.com - CTRP - cls: 70.63 chg: +1.62 stop: 67.45

Company Description:
Ctrip.com International, Ltd. is a leading travel service provider of hotel accommodations, airline tickets and packaged-tours in China. Ctrip aggregates information on hotels and flights and enable customers to make informed and cost-effective hotel and flight bookings. Ctrip targets primarily business and leisure travelers in China who do not travel in group. (source: company press release or website)

Why We Like It:
CTRP is breaking out higher from a three-week consolidation near the $70.00 level. Volume has picked up on the breakout, which is bullish. Unfortunately, the cause behind Friday's late morning spike higher is a mystery. We can't find anything to account for the sudden rise but suspect it was a positive report from a competitor. We are suggesting call positions with CTRP above $70.00. Our short-term target is the stock's highs in the $74.50-75.00 range. The Point & Figure chart forecasts a $93 target. We do not want to hold over the May 16th earnings report.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 70.00 QCT-FN open interest= 476 current ask $4.80
BUY CALL JUN 75.00 QCT-FO open interest= 533 current ask $2.55

Picked on April 29 at $ 70.63
Change since picked: + 0.00
Earnings Date 05/16/07 (confirmed)
Average Daily Volume = 389 thousand

---

General Dynamics - GD - cls: 80.27 chg: +1.17 stop: 76.45

Company Description:
General Dynamics, headquartered in Falls Church, Va., employs approximately 82,600 people worldwide and had 2006 revenues of $24.1 billion. (source: company press release or website)

Why We Like It:
We want to take advantage of the strength in defense stocks so we're adding GD as a call candidate. The stock broke out above significant resistance back on April 20th. Shares have since consolidated sideways but look poised to move higher. We are suggesting call positions in the $78.50-81.00 range. More conservative traders may seriously consider waiting for a breakout over resistance at $81.00 (or 81.25) before initiating positions. Our target is the 84.75-85.00 range. More aggressive traders may want to aim higher. The P&F chart has produced a triple-top breakout buy signal with a $96 target.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 80.00 GD-FP open interest= 80 current ask $2.65
BUY CALL JUN 85.00 GD-FQ open interest=618 current ask $0.70

Picked on April 29 at $ 80.27
Change since picked: + 0.00
Earnings Date 04/25/07 (confirmed)
Average Daily Volume = 1.4 million
 

New Puts

AvalonBay - AVB - cls: 125.95 chg: -3.04 stop: 130.05

Company Description:
AvalonBay, an S&P 500 company, is in the business of developing, redeveloping, acquiring, and managing apartment communities in high barrier- to-entry markets of the United States. As of December 31, 2006, the company owned or held an ownership interest in 167 apartment communities containing 48,294 apartment homes in ten states and the District of Columbia, of which 17 communities are under construction and six communities are under reconstruction. (source: company press release or website)

Why We Like It:
The multi-year bull-run in AVB has hit a serious speed bump. Shares broke their up trend back in early March and have bounced around sideways since. Now investors are selling the stock following the company's latest earnings report. Odds are good AVB could see a lot more profit taking (just look at the weekly chart). We are suggesting a trigger to buy puts at $124.45, which would be a new relative low and a breakdown from the recent trading range. There is potential support at $120 but our target is the $112.50-110.00 range. The P&F chart points to a $110 target.

Suggested Options:
We are suggesting the June or July puts with a trigger to open plays at $124.45. We don't see any June puts under $125.

BUY PUT JUN 130 AVB-RF open interest= 0 current ask $6.30
BUY PUT JUN 125 AVB-RE open interest= 0 current ask $3.70

BUY PUT JUL 125 AVB-SE open interest= 91 current ask $5.20
BUY PUT JUL 120 AVB-SD open interest=207 current ask $3.30
BUY PUT JUL 115 AVB-SC open interest= 3 current ask $2.05

Picked on April xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/26/07 (confirmed)
Average Daily Volume = 770 thousand

---

British Airways - BAB - cls: 101.42 chg: -0.43 stop: 104.26

Company Description:
British Airways is the UK's largest international scheduled airline, flying to over 550 destinations at convenient times, to the best located airports. (source: company press release or website)

Why We Like It:
Normally we would never play BAB because the average daily volume is just too low. However, crude oil looks poised to breakout higher and that's going to impact the airlines. BAB is still a high-dollar stock and could see some significant declines. We're suggesting puts on BAB now with shares under the 50-dma (near $102.30). More conservative traders may want to wait for a decline under $100. Our target is the March lows near $95.00. We'll use a $96.00-95.00 target range. More aggressive traders may want to aim for the rising 200-dma near $92. We do not want to hold over the mid-May earnings report.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 105 BAB-RA open interest= 8 current ask $7.30
BUY PUT JUN 100 BAB-RT open interest=22 current ask $5.20
BUY PUT JUN 95 BAB-RS open interest=43 current ask $3.20

Picked on April 29 at $101.42
Change since picked: + 0.00
Earnings Date 05/18/07 (unconfirmed)
Average Daily Volume = 65 thousand

---

Ceradyne - CRDN - cls: 59.08 chg: -3.65 stop: 62.51

Company Description:
Ceradyne develops, manufactures and markets advanced technical ceramic products and components for defense, industrial, automotive/diesel and commercial applications. (source: company press release or website)

Why We Like It:
This is purely a technical play. The company reported earnings on Friday morning and the news was positive. Fundamentally things sound pretty good for CRDN. Yet the charts are screaming that this is the place to buy puts. Shares produced a failed-rally bearish reversal at resistance on Friday morning. We're suggesting puts now with CRDN under $60.00. Our short-term target is the $55.25-55.00 range. Watch out for potential support at the rising 50 or 100-dma.

Suggested Options:
We are suggesting the June puts.

BUY PUT JUN 60.00 AUE-RL open interest= 414 current ask $3.10
BUY PUT JUN 55.00 AUE-RK open interest=2630 current ask $1.25

Picked on April 29 at $ 59.08
Change since picked: + 0.00
Earnings Date 04/27/07 (confirmed)
Average Daily Volume = 667 thousand
 

New Strangles

None today.
 

New Play Archives