Option Investor
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New Option Plays

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Play Editor's Note: I discussed our market outlook with Jim, tonight's market wrap author, and agree with him that there isn't a lot of compelling reasons for investors to buy stocks this week. The markets are facing a lot of uncertainty. Plus, the global markets could see some serious profit taking, which will likely influence trading here in the U.S. The month of October is likely to be very choppy but will hopefully set up for an entry point into a year-end rally.

New Calls

None today.

New Puts

IDEXX Labs - IDXX - cls: 109.59 change: -1.31 stop: 113.85

Company Description:
IDEXX Laboratories, Inc. is a leader in companion animal health, serving practicing veterinarians around the world with innovative, technology-based offerings, including a broad range of diagnostic products and services, practice management systems and pharmaceuticals. (source: company press release or website)

Why We Like It:
The bullish up trend in IDXX is in serious jeopardy. The stock produced a top on September 20th and the slow roll over into a bearish pattern is now picking up momentum - lots of momentum. Volume has soared to more than twice the daily average for the last two sessions. The close under $110 is another bearish signal. Given the huge volume spikes we do not expect IDXX to find any support at its rising 50-dma near $108.60. We are suggesting a stop loss just above the 10-dma. Our target is the $101.00-100.00 range. We do not want to hold over the late October earnings report.

Suggested Options:
We are suggesting the November puts. At this time We only see November $120, 115s, and 110s. New strikes should be available soon. Nimble traders might consider October strikes but October options expire in three weeks.

BUY PUT NOV 110 UID-WB open interest= 10 current ask $6.50

November $105 puts would also be a potential play.

Picked on September 30 at $109.59
Change since picked: + 0.00
Earnings Date 10/27/07 (unconfirmed)
Average Daily Volume = 210 thousand


Lamar Advertising - LAMR - cls: 48.97 change: -0.34 stop: 51.55

Company Description:
Founded in 1902, Lamar currently operates more than 150 outdoor advertising companies in more than 40 states and Puerto Rico. Lamar operates more than 149,000 billboards and has more than 75 transit franchises that reach driving audiences in 18 states and two provinces through displays on bus shelters, benches and buses. (source: company press release or website)

Why We Like It:
It was a bearish week for LAMR. The stock continued to under perform the markets and shares produced a new triple-bottom breakdown sell signal on its P&F chart. This looks like a bearish momentum play. However, we want to warn readers that last Wednesday's bounce was near the August 2006 lows around $47. Short-term we see Friday's failed rally under $50.00 as a new entry point to buy puts. Yet if we look at the weekly we have to wonder if the bounce is over already. To protect yourself consider using a tight stop loss just above the $50.00 mark. We're going to suggest a stop loss at $51.55 to give LAMR a little bit of room to maneuver. Our target is the $45.25-45.00 range.

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 50.00 LJQ-WJ open interest=420 current ask $2.70
BUY PUT NOV 45.00 LJQ-WI open interest=275 current ask $0.75

Picked on September 30 at $ 48.97
Change since picked: + 0.00
Earnings Date 11/08/07 (unconfirmed)
Average Daily Volume = 1.2 million


POSCO - PKX - cls: 178.77 change: -2.36 stop: 185.05

Company Description:
POSCO is a South Korean steel producer.

Why We Like It:
Calling tops or bottoms can be extremely hazardous to your trading account but that's what this play is attempting to do. The massive rally in PKX appears to have run out of gas. Friday's move was both a bearish close under $180 and a bearish engulfing candlestick (reversal) pattern. However, is this just a pause for PKX to catch its breath and continue higher or is it the beginning of a correction? The stock is very overbought but momentum plays always seem to get more overbought then we think they should. We suspect that with Friday being the end of the quarter, and with Asian markets at or near significant highs, that this stock could see some profit taking or at least some mutual fund "undressing" now that the quarter is over. We have to warn you again that this is a very aggressive position. The P&F chart is super bullish with a $268 target. We have two targets. Our first target is the $171.50-170.00 range. Our second target is the $165.00-160.00 zone. This should be a very quick play. While we do not have a confirmed earnings date the information we have found suggests that PKX will report earnings around October 8th and we don't want to hold over the report.

Suggested Options:
This is a high-risk, aggressive play so we're going to go with some high-risk, aggressive options with the October puts. Remember - October strikes expire in three weeks. We expect to be out of this play in just a few days.

BUY PUT OCT 185 PKX-VW open interest= 59 current ask $11.80
BUY PUT OCT 180 PKX-VV open interest=148 current ask $ 8.90
BUY PUT OCT 175 PKX-VU open interest= 39 current ask $ 6.30
BUY PUT OCT 170 PKX-VN open interest=691 current ask $ 4.40

Picked on September 30 at $178.77
Change since picked: + 0.00
Earnings Date 10/08/07 (unconfirmed)
Average Daily Volume = 812 thousand


Sears Holding - SHLD - cls: 127.20 chg: +0.23 stop: 132.65

Company Description:
Sears Holdings Corporation, the publicly traded parent of Kmart and Sears, Roebuck and Co., is the nation's fourth largest broadline retailer with over $50 billion in annual revenues and approximately 3,800 full-line and specialty retail stores in the United States and Canada. (source: company press release or website)

Why We Like It:
The markets have been worried about what many are forecasting to be the worst holiday shopping season in five years. Last week's sales warning from Target (TGT) pushed the entire retail sector lower. SHLD reacted to the TGT news with a spike to new 52-week lows. The oversold bounce that followed in SHLD has stalled under what looks like resistance near $130.00. We're suggesting puts with SHLD under $130. Our first target is the $120.50-120.00 range. Our second target is the $115.50-115.00 range. The P&F chart is a bit more bearish with a $108 target. We're suggesting a stop loss at $132.65 but it looks like readers might be able to get away with a stop a little bit closer to the $130 level if you wanted to try. We do not want to hold over the November earnings report. FYI: The retailers could see some volatility when many of them announce same store sales numbers late this week or early next week (somewhere in the October 4th-9th time frame).

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 130 KTQ-WY open interest=177 current ask $8.20
BUY PUT NOV 125 KTQ-WE open interest=273 current ask $5.80
BUY PUT NOV 120 KTQ-WD open interest=334 current ask $4.00

Picked on September 30 at $127.20
Change since picked: + 0.00
Earnings Date 11/15/07 (unconfirmed)
Average Daily Volume = 2.3 million

New Strangles

None today.

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