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New Plays

New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
None AZO AMZN
  CMG ESRX
  GRMN  
  TNP  
  SEPR  
  WYNN  

Play Editor's Note: We are facing a dilemma. This past week was bearish and culminated into a frenzied sell-off on Friday. The recent weakness has produced a bumper crop of sell signals among equities. We need to juggle our bullish bias for the fourth quarter with the short-term downtrend. Plus, to make the waters even more muddy many stocks are now looking short-term oversold. I would expect an oversold bounce soon although probably not Monday morning. Do traders buy the bounce or look for it to roll over and use it as a new entry point for bearish positions? One of the hardest things traders have to do is trade what we see or what the market is giving us and to avoid trading our bias. It's been said before - the market is always right whether we agree with it or not.


New Calls

None today.
 

New Puts

Autozone - AZO - cls: 118.67 change: -2.62 stop: 122.26

Company Description:
AutoZone sells auto and light truck parts, chemicals and accessories through 3,881 AutoZone stores in the United States plus the District of Columbia and Puerto Rico and 110 AutoZone stores in Mexico and also sells the ALLDATA brand automotive diagnostic and repair software. (source: company press release or website)

Why We Like It:
The September rally in AZO ran into heavy resistance at the $125 level. After spending a week failing to breakout the rally has rolled over. The MACD on the daily chart has produced a new sell signal. Friday's breakdown and close under psychological support near $120 is a bearish entry point to buy puts. We'll try and play with a relatively tight stop loss just above the 10-dma. Our target is the $112.00-110.00 range. FYI: The P&F chart is still bullish for now.

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 120 AZO-WD open interest= 541 current ask $4.80
BUY PUT NOV 115 AZO-WC open interest= 893 current ask $2.60

Picked on October 21 at $118.67
Change since picked: + 0.00
Earnings Date 12/05/07 (unconfirmed)
Average Daily Volume = 800 thousand

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Chipotle Mexican Grill - CMG - cls: 123.40 chg: -2.70 stop: 128.26

Company Description:
Chipotle Mexican Grill offers a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. (source: company press release or website)

Why We Like It:
It would appear that the rally in CMG has come to an end or at least a pause. The stock screamed higher and hit $133.63 several days ago. The stock gapped down the next day. The bounce back has been slow and Friday's session saw CMG trade just high enough to "fill the gap" before trending lower. The fill the gap move can act like the starting gun for CMG to begin its next move lower. We'll try and play with a relatively tight stop loss above Friday's high. We are suggesting put positions now but more conservative traders may want to wait for a breakdown under $120 first before initiating positions. Our target is the $112.00-110.00 range, near its rising 50-dma. We do not want to hold over the October 30th earnings report so this will be a quick play. FYI: The intraday low on October 12th at $113.51 was a bad tick. CMG can be somewhat volatile. This should be considered an aggressive play since we're suggesting puts on a stock that still has a relatively bullish trend. Plus, the options are looking a little expensive.

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 125 CMG-WE open interest=566 current ask $10.10
BUY PUT NOV 120 CMG-WD open interest=486 current ask $ 7.50
BUY PUT NOV 115 CMG-WC open interest=549 current ask $ 5.30

Picked on October 21 at $123.40
Change since picked: + 0.00
Earnings Date 10/30/07 (confirmed)
Average Daily Volume = 446 thousand

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Garmin Ltd. - GRMN - cls: 110.10 change: -5.04 stop: 117.01

Company Description:
Through its operating subsidiaries, Garmin Ltd. designs and manufactures navigation, communication and information electronics. Garmin is a leader in the general aviation and consumer GPS markets and its products serve aviation, marine, outdoor, fitness, automotive, mobile and OEM applications. (source: company press release or website)

Why We Like It:
GRMN was one of the market's best performers this year and still is but the game changed on October 1st of this year. That was when Nokia (NOK) announced the acquisition of Navteq (NVT). NVT is one of GRMN's biggest suppliers and the news sent shares of GRMN crashing. The stock has recovered but has been struggling with resistance in the $116-117 zone. Friday's move in GRMN looks like a failed rally and bearish engulfing candlestick pattern. We are suggesting put positions now although more conservative traders may want to wait for a new decline under $108.50 before considering positions. The stock can be very volatile and we're playing a dangerous game with a stop loss just above Friday's high. Watch for potential support at the 50-dma near $105.70. We have two targets. Our first target is the $100.50-100.00 range. Our second target is the $95.50-95.00 range. We do not want to hold over the October 31st earnings report.

Suggested Options:
Due to GRMN's volatility the options are expensive! We're suggesting the November puts.

BUY PUT NOV 115 RZJ-WC open interest=1886 current ask $11.20
BUY PUT NOV 110 RZJ-WB open interest=5314 current ask $ 8.50
BUY PUT NOV 105 RZJ-WA open interest=2581 current ask $ 6.00
BUY PUT NOV 100 RZJ-WT open interest=4174 current ask $ 4.00

Picked on October 21 at $110.10
Change since picked: + 0.00
Earnings Date 10/31/07 (confirmed)
Average Daily Volume = 4.5 million

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Tsakos Energy - TNP - cls: 69.62 change: -2.65 stop: 72.16

Company Description:
Following the delivery of Athens 2004 to her new owners on October 2, 2007, TEN's proforma fleet consists of 51 vessels of 5.4 million dwt. Today, TEN operates a fleet of 43 vessels all double-hull. Additionally, its newbuilding program of eight vessels includes six aframax crude carriers and two panamax tankers representing 777,000 dwt. The strategy of a balanced diverse fleet is reflected in 26 crude transporters ranging from VLCCs to aframaxes and 24 product carriers ranging from handysize to aframaxes; complemented by one LNG. (source: company press release or website)

Why We Like It:
We usually try to avoid playing stocks with average daily volume under 250-300,000 shares a day. TNP's breakdown from its four-week trading range was too tempting. Aggressive traders may want to buy puts now. We want to see just a little more confirmation since TNP may have support near $69.50 and its 50-dma. We're suggesting a trigger to buy puts at $69.40. If triggered our target is the $65.10-63.65 zone. Almost all of its technical indicators on both the daily and weekly charts are bearish or they are turning bearish. FYI: The P&F chart is still bullish. We would be bullish too if TNP could breakout over $75.00. Keep an eye on some of the high-flying water transport stocks like DRYS and EXM. If these start to sell-off then it could boost the declines in TNP.

Suggested Options:
We do not want to hold over the early November earnings report. We're suggesting the November puts. Our trigger is at $69.40.

BUY PUT NOV 70.00 TNP-WN open interest=14 current ask $3.20
BUY PUT NOV 65.00 TNP-WM open interest=39 current ask $1.10

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/08/07 (unconfirmed)
Average Daily Volume = 114 thousand

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Sepracor Inc. - SEPR - cls: 23.71 change: -1.18 stop: 25.61

Company Description:
Sepracor Inc. is a research-based pharmaceutical company dedicated to treating and preventing human disease by discovering, developing and commercializing innovative pharmaceutical products that are directed toward serving unmet medical needs. (source: company press release or website)

Why We Like It:
Shares of SEPR have been under performing the markets for months. The last couple of months have seen the stock stuck in a $27-30 trading range. This past week saw SEPR try to find support at $25.00 but Friday's sell-off broke that support. Volume on the breakdown was pretty strong. We are suggesting put positions now although readers could wait and look for a bounce/failed rally under $25.00 as alternative entry. Our target is the $20.25-20.00 zone. We do not want to hold over the October 30th earnings report.

Suggested Options:
We are suggesting the November puts.

BUY PUT NOV 25.00 ERQ-WE open interest=2998 current ask $2.45
BUY PUT NOV 22.50 ERQ-WX open interest=2336 current ask $1.05
BUY PUT NOV 20.00 ERQ-WD open interest= 154 current ask $0.35

Picked on October 21 at $ 23.71
Change since picked: + 0.00
Earnings Date 10/30/07 (confirmed)
Average Daily Volume = 1.5 million

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Wynn Resorts - WYNN - cls: 150.03 chg: -6.23 stop: 157.55

Company Description:
Wynn Resorts owns and operates Wynn Las Vegas, a luxury hotel and destination casino resorts located on the Las Vegas Strip. Wynn Las Vegas features 2,716 luxurious guest rooms and suites; an approximately 111,000 square foot casino; 22 food and beverage outlets; an on-site 18-hole golf course; approximately 223,000 square feet of meeting space; an on-site Ferrari and Maserati dealership; and approximately 76,000 square feet of retail space. On September 6, 2006, Wynn Macau, a destination casino resort in the Macau Special Administrative Region of the People's Republic of China, opened. (source: company press release or website)

Why We Like It:
Shares of WYNN soared for several weeks on rising expectations for its Macau operations. The stock gapped down in early October when reality, while quite good, did not quite meet the market's revenue expectations. We would actually be bullish on WYNN but right now the stock looks like it's gotten ahead of itself. Friday's sell-off looks like a bearish breakdown from a pennant-type of pattern. Aggressive traders could open positions now. We want to see a breakdown under $150. We're suggesting a trigger to buy puts at $149.00. If triggered we will have two targets. Our first target is the $140.50-140.00 range. Our second target is the $132.00-130.00 range. Currently the P&F chart is bearish with a $118 target.

Suggested Options:
WYNN can be a volatile stock so the options are expensive. We're suggesting the November puts. Our trigger to open positions is at $149.00.

BUY PUT NOV 150 UIP-WJ open interest= 866 current ask $9.70
BUY PUT NOV 145 UWY-WY open interest=1564 current ask $7.30
BUY PUT NOV 140 UWY-WX open interest= 411 current ask $5.40

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/07/07 (unconfirmed)
Average Daily Volume = 2.3 million
 

New Strangles

Amazon.com - AMZN - cls: 89.76 chg: -0.09 stop: n/a

Company Description:
Amazon.com, Inc., a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com, Inc. seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. (source: company press release or website)

Why We Like It:
Shares of AMZN have been trading sideways the last several sessions as investors wait to see the company's next earnings report. Given the run up in shares over the past few months expectations for AMZN may be too high. We're suggesting a strangle to take advantage of any post-earnings volatility. The company is due to report on October 23rd after the market's closing bell. That gives us two days to open positions.

Suggested Options:
We are suggesting the November options. A strangle involves buying both an out-of-the-money call and put. We would double check your option symbols. Normally a November $100 call would end with -KT but the CBOE is listing it as -KY.

BUY CALL NOV 100 ZQN-KY open interest= 4445 current ask $3.10
-and-
BUY PUT NOV 80 ZQN-WP open interest= 6571 current ask $2.41

Our estimated cost is $5.51. We want to sell if either option hits $8.50 or higher.

*You could do a strangle with the Nov. 95 call and Nov. 85 put but it would cost about $8.60. A straddle at the $90 strike would cost about $13.00.

Picked on October 21 at $ 89.76
Change since picked: + 0.00
Earnings Date 10/23/07 (confirmed)
Average Daily Volume = 6.3 million

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Express Scripts - ESRX - cls: 59.65 chg: -0.08 stop: n/a

Company Description:
Express Scripts, Inc. is one of the largest PBM companies in North America, providing PBM services to over 50 million members. Express Scripts serves thousands of client groups, including managed-care organizations, insurance carriers, employers, third-party administrators, public sector, and union-sponsored benefit plans. (source: company press release or website)

Why We Like It:
Shares of ESRX have been big winners this year. There could be a lot of expectations built into the company's upcoming earnings report. We're suggesting a strangle to capture any post-earnings move. The $59.00-61.00 zone is where we would want to open positions. ESRX is due to report earnings on October 24th after the closing bell.

Suggested Options:
We are suggesting the November options. A strangle involves buying both an out-of-the-money call and put.

BUY CALL NOV 65.00 XTQ-KM open interest= 700 current ask $1.00
-and-
BUY PUT NOV 55.00 XTQ-WK open interest=3025 current ask $0.95

Our estimated cost is $1.95. We want to sell if either option hits $3.50 or higher.

Picked on October 21 at $ 59.65
Change since picked: + 0.00
Earnings Date 10/24/07 (confirmed)
Average Daily Volume = 2.1 million
 

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