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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
GSF None AMD
HP   INTC
MGA   MAN
PCAR   MTG
XTO    

New Calls

GlobalSantaFe - GSF - cls: 73.05 change: -0.20 stop: 69.90

Company Description:
GlobalSantaFe is one of the largest offshore oil and gas drilling contractors and the leading provider of drilling management services worldwide. The company owns or operates a contract drilling fleet of 37 premium jackup rigs; six heavy-duty, harsh environment jackups; 11 semisubmersibles and three dynamically positioned, ultra-deepwater drillships, as well as two semisubmersibles owned by third parties and operated under a joint venture agreement. (source: company press release or website)

Why We Like It:
We believe that oil and energy-related stocks will continue to be bullish for the next two or three weeks - that is when we expect crude oil to see a seasonal peak. In the meantime we want to play the bullish trend in GSF. The stock is also an acquisition target, which should keep a bid under the share price. We're suggesting positions now although another dip in the $70-71 region would also be attractive. Our target is the $78.00-80.00 range. We do not want to hold over the early August earnings report. The P&F chart is bullish with an $87 target.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 70.00 GSF-HN open interest= 763 current ask $5.30
BUY CALL AUG 75.00 GSF-HO open interest=11411 current ask $2.50

Picked on July 15 at $ 73.05
Change since picked: 0.00
Earnings Date 08/02/07 (unconfirmed)
Average Daily Volume = 4.8 million

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Helmerich Payne - HP - cls: 36.30 chg: -0.13 stop: 33.95

Company Description:
Helmerich & Payne, Inc. is primarily a contract drilling company. As of June 30, 2007, the Company's fleet included 147 U.S. land rigs, 27 international land rigs and nine offshore platform rigs. In addition, the Company is committed to complete another 16 new H&P-designed and operated FlexRigs*, expanding its total number of FlexRigs to 125. (source: company press release or website)

Why We Like It:
HP makes some of the best drilling rigs in the business and considering their market cap of $3.75 billion we're shocked that someone hasn't acquired them yet. The stock looks poised to breakout higher with its bullish trend of higher lows. We're suggesting call positions now although traders really have a choice. You could wait for another drip near $35.00 or a new high above short-term resistance near $36.60. HP does appear to have long-term resistance near $40.00 so we're setting our target in the $39.85-40.00 range.

Suggested Options:
We are suggesting the August calls and at this time we plan to exit ahead of the August 1st earnings report. We are considering an exception to that rule and holding over the earnings report. If you want to bet on HP being acquired any time soon you may want to buy September or December calls.

BUY CALL AUG 35.00 HP-HG open interest=104 current ask $2.30
BUY CALL AUG 40.00 HP-HH open interest=235 current ask $0.35

Picked on July 15 at $ 36.30
Change since picked: 0.00
Earnings Date 08/01/07 (confirmed)
Average Daily Volume = 923 thousand

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MAGNA Intl. - MGA - close: 95.40 chg: 1.51 stop: 91.89

Company Description:
We are the most diversified automotive supplier in the world. We design, develop and manufacture automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers (OEMs) of cars and light trucks in our three geographic segments - North America, Europe, and Rest of World (primarily Asia, South America and Africa). (source: company press release or website)

Why We Like It:
MGA was actually on our list to add on Thursday night but we ran out of time. We still like it here with Friday's bullish breakout over resistance near $94.00. Technicals are improving and the MACD on the daily chart just produced a new buy signal. Readers might want to wait for a dip back toward $94.00, which should now be short-term support. Our target is the $99.50-100.00 range. The P&F chart is bullish with a $110 target.

Suggested Options:
We are suggesting the August calls. At this time we don't see any August $100 strikes available.

BUY CALL AUG 95.00 MGA-HS open interest=50 current ask $3.60

Picked on July 15 at $ 95.40
Change since picked: 0.00
Earnings Date 08/08/07 (unconfirmed)
Average Daily Volume = 719 thousand

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PACCAR - PCAR - close: 93.77 change: 0.57 stop: 89.95

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 aftermarket support for its customers worldwide. (source: company press release or website)

Why We Like It:
We've been watching PCAR for a couple of weeks now looking for the right entry point. The stock spiked higher on July 9th after an analyst firm upgraded the stock. Shares dipped back to retest broken resistance as new support near $90.00. Now the bounce is our entry point to buy calls. This is somewhat aggressive because we don't have a lot of time. We plan to exit ahead of the July 25th (unconfirmed) earnings report. Our target is the $99.50-100.00 range. The P&F chart is bullish with a $109 target.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 90.00 PAQ-HR open interest=1370 current ask $6.40
BUY CALL AUG 95.00 PAQ-HS open interest= 787 current ask $3.50
BUY CALL AUG 100.0 PAQ-HT open interest= 530 current ask $1.70

Picked on July 15 at $ 93.77
Change since picked: 0.00
Earnings Date 07/25/07 (unconfirmed)
Average Daily Volume = 1.6 million

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XTO Energy - XTO - close: 60.56 change: 0.67 stop: 58.45

Company Description:
XTO Energy Inc. is a domestic natural gas producer engaged in the acquisition, exploitation and development of quality, long-lived oil and natural gas properties in the United States. Its properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana and Mississippi. (source: company press release or website)

Why We Like It:
Buying dips near the rising 50-dma in XTO has been a profitable strategy the last several months. Shares are providing another opportunity to do it again. This is somewhat of an aggressive trade. We only expect oil and energy stocks to rally for another two or three weeks plus we plan to exit ahead of XTO's late July earnings report. Thus we don't have a lot of time. We'll try and limit our risk with a relatively tight stop loss at $58.45 but more conservative traders could put their stops closer to the 50-dma (around $59.15). An alternative entry point would be to wait for another rise past $61.50 to clear the congestion there. Our short-term target is the $64.85-65.00 range. More aggressive traders may want to aim higher but remember our time constraints. The P&F chart is bullish with a $73 target.

Suggested Options:
We are suggesting the August calls.

BUY CALL AUG 55.00 XTO-HK open interest=3269 current ask $6.40
BUY CALL AUG 60.00 XTO-HL open interest=9173 current ask $2.55
BUY CALL AUG 65.00 XTO-HM open interest=5019 current ask $0.80

Picked on July 15 at $ 60.56
Change since picked: 0.00
Earnings Date 07/25/07 (unconfirmed)
Average Daily Volume = 3.8 million
 

New Puts

None today.
 

New Strangles

Advanced Micro - AMD - cls: 15.43 chg: 0.07 stop: n/a

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:
We believe that larger rival Intel and its earnings report due out on July 17th will have a big impact on shares of AMD. We would expect AMD to trade down on the INTC news but we'd rather take a neutral approach so we're suggesting a strangle. We only have two days, Monday and Tuesday, to open positions.

Suggested Options:
We're suggesting a strangle so we need to buy an out of the money call and an out of the money put. We're suggesting the August strikes. If you really want to be aggressive you could play July strikes but they expire in five days. At current prices our estimated cost is $1.18. We want to sell if either option hits $1.85 or higher. Aggressive traders could aim for $2.40.

BUY CALL AUG 16.00 AMD-HQ open interest=7424 current ask $0.60
-and-
BUY PUT AUG 15.00 AMD-TC open interest=7774 current ask $0.58

Picked on July 15 at $ 15.43
Change since picked: 0.00
Earnings Date 07/19/07 (confirmed)
Average Daily Volume = 26.1 million

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Intel - INTC - cls: 25.97 change: -0.03 stop: n/a

Company Description:
Intel, the world leader in silicon innovation, develops technologies, products and initiatives to continually advance how people work and live. The Intel-powered classmate PCs was specifically designed by Intel to meet the needs of classrooms in emerging markets. The affordable and fully functional PC supports collaborative learning environments for K-12 schools and has started volume shipment to emerging markets. (source: company press release or website)

Why We Like It:
We expect Intel's earnings report, due out after the bell on Tuesday night, to produce a big move in the stock price. Odds are good INTC will see a "sell the news" move but we can't count on it so we're suggesting a strangle. We only have Monday and Tuesday to open positions.

Suggested Options:
We're suggesting a strangle so we need to buy an out of the money call and an out of the money put. We're suggesting the August strikes. If you really want to be aggressive you could play July strikes but they expire in five days. At current prices our estimated cost is $0.96. We want to sell if either option hits $1.65 or higher. FYI: You will want to try and keep your investment amounts relatively even on both sides of the strangle to keep the strategy neutral.

BUY CALL AUG 27.50 INQ-HY open interest=12789 current ask $0.44
-and-
BUY PUT AUG 25.00 INQ-TE open interest=23250 current ask $0.52

Picked on July 15 at $ 25.97
Change since picked: 0.00
Earnings Date 07/17/07 (confirmed)
Average Daily Volume = 60.3 million

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Manpower - MAN - close: 94.60 chg: 0.08 stop: n/a

Company Description:
Manpower Inc. is a world leader in the employment services industry; creating and delivering services that enable its clients to win in the changing world of work. The $18 billion company offers employers a range of services for the entire employment and business cycle including permanent, temporary and contract recruitment; employee assessment and selection; training; outplacement; outsourcing and consulting. (source: company press release or website)

Why We Like It:
Our directional play on MAN wasn't working out very well so we have decided to switch toward a strangle to take advantage of any post-earnings volatility. The company is due to report on Thursday morning. That gives us three days to open positions. We are suggesting an entry range in the $94-96 zone and the closer to $95.00 the better.

Suggested Options:
We're suggesting a strangle so we need to buy an out of the money call and an out of the money put. We're suggesting the August strikes. If you really want to be aggressive you could play July strikes but they expire in five days. At current prices our estimated cost is $3.35. We want to sell if either option hits $5.75 or higher. FYI: You will want to try and keep your investment amounts relatively even on both sides of the strangle to keep the strategy neutral.

BUY CALL AUG 100.0 MAN-HT open interest= 72 current ask $1.55
-and-
BUY PUT AUG 90.00 MAN-TR open interest=476 current ask $1.80

Picked on July 15 at $ 94.60
Change since picked: 0.00
Earnings Date 07/19/07 (confirmed)
Average Daily Volume = 636 thousand

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MGIC Invest. - MTG - close: 56.98 change: -0.05 stop: n/a

Company Description:
MGIC, the principal subsidiary of MGIC Investment Corporation, is the nation's leading provider of private mortgage insurance coverage with $178.3 billion primary insurance in force covering 1.3 million mortgages as of March 31, 2007. MGIC serves 5,000 lenders with locations across the country and in Puerto Rico and Australia, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality. (source: company press release or website)

Why We Like It:
If you read the market wrap for this weekend then you already know that Jim discussed MTG in detail so we don't feel the need to repeat him too much here. The stock has sunk on fears that the subprime meltdown will impact MTG's earnings. Shares are trading near support. An earnings surprise to the upside should spark some serious short covering and bargain buying. More bad news should push MTG to new relative lows. The company reports on Thursday morning so we only have three days to open positions. We are suggesting an entry range in the $56-58 zone. The closer to $57.50 the better.

Suggested Options:
We're suggesting a strangle so we need to buy an out of the money call and an out of the money put. We're suggesting the August strikes. If you really want to be aggressive you could play July strikes but they expire in five days. At current prices our estimated cost is $3.10. We want to sell if either option hits $5.95 or higher. FYI: You will want to try and keep your investment amounts relatively even on both sides of the strangle to keep the strategy neutral.

BUY CALL AUG 60.00 MTG-HL open interest=3243 current ask $1.35
-and-
BUY PUT AUG 55.00 MTG-TK open interest=3115 current ask $1.75

Picked on July 15 at $ 56.98
Change since picked: 0.00
Earnings Date 07/19/07 (confirmed)
Average Daily Volume = 1.8 million
 

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