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New Option Plays

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BNI None None
CMI    
LEH    

New Calls

Burlington N.SantaFe- BNI - cls: 86.50 chg: +0.56 stop: 83.90

Company Description:
A subsidiary of Burlington Northern Santa Fe Corporation, BNSF Railway Company operates one of the largest North American rail networks, with about 32,000 route miles in 28 states and two Canadian provinces. BNSF is among the world's top transporters of intermodal traffic, moves more grain than any other American railroad, carries the components of many of the products we depend on daily, and hauls enough low-sulphur coal to generate about ten percent of the electricity produced in the United States. (source: company press release or website)

Why We Like It:
Three trading days ago the railroad sector broke out higher from a two-month consolidation. Shares of BNI lead the way with a rally past resistance near $84 and again near $85 and its 100-dma. Traders have since been buying the dips in BNI near $85 and its 100-dma so the stock has already tested broken resistance as new support. The group looks like it has farther to rally and we like BNI as a candidate to capture any further strength in the sector. We're suggesting call positions now with BNI above $85.00. Our suggested stop loss is at $83.90 but more conservative traders might want to place their stop closer toward $84.60. We have two targets on BNI. Our first target is the $89.75-90.00 range. Our second target is the $92.50-94.00 range. We only have two weeks and plan to exit ahead of the October 23rd earnings report. FYI: The P&F chart is bullish with a $96 target.

Suggested Options:
We are suggesting the November calls but plan to exit ahead of October 23rd.

BUY CALL NOV 85.00 BNI-KQ open interest=3068 current ask $4.70
BUY CALL NOV 90.00 BNI-KR open interest=1107 current ask $2.25

Picked on October 09 at $ 86.50
Change since picked: + 0.00
Earnings Date 10/23/07 (confirmed)
Average Daily Volume = 4.3 million

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Cummins Inc. - CMI - cls: 139.98 change: +3.16 stop: 134.45

Company Description:
Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. (source: company press release or website)

Why We Like It:
CMI has been a market leader and given the bullish breakout in the major indices we are expecting CMI to keep up the pace. The stock has a bullish trend of higher lows and shares look poised to breakout over resistance near $140-141. We're suggesting a trigger to buy calls at $140.85, just above today's high. However, we'll also be watching for a dip and bounce in the $136-135 range as an alternative entry point. If CMI hits our trigger at $140.85 then our target is the $149.50-150.00 range. This is an aggressive play given CMI's volatility and our two-week time frame. We do not want to hold over earnings.

Suggested Options:
We are suggesting a trigger to open positions at $140.85. We'd suggest the November calls.

BUY CALL NOV 140 CDM-KH open interest=689 current ask $9.70
BUY CALL NOV 145 CDM-KI open interest=382 current ask $7.50
BUY CALL NOV 150 CDM-KJ open interest=210 current ask $5.50

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/25/07 (confirmed)
Average Daily Volume = 2.0 million

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Lehman Brothers - LEH - close: 64.59 change: +1.81 stop: 61.99

Company Description:
Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. (source: company press release or website)

Why We Like It:
The broker-dealer stocks have recovered sharply from their August lows and the XBD index just broke through technical resistance at its 200-dma. If the group continues to rally then LEH should follow. Currently LEH is consolidating under resistance near $65.00. Traders have been buying the dips and the stock looks ready to breakout higher. We're suggesting a trigger to buy calls on LEH at $65.25. If triggered our target is the $69.85-70.00 range. More aggressive traders may want to aim higher and shoot for the 200-dma.

Suggested Options:
We are suggesting the November calls. Our suggested trigger to open positions is at $65.25.

BUY CALL NOV 60.00 LES-KL open interest=3195 current ask $6.20
BUY CALL NOV 65.00 LES-KM open interest=7665 current ask $2.90
BUY CALL NOV 70.00 LES-KN open interest=1538 current ask $1.10

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 12/13/07 (unconfirmed)
Average Daily Volume = 15.8 million
 

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