Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
BX None BIIB

New Calls

Blackstone - BX - close: 19.84 chg: +1.74 stop: 17.24

Company Description:
Blackstone is a leading global alternative asset manager and provider of financial advisory services listed on the New York Stock Exchange (ticker symbol BX) with total assets under management of approximately $98.2 billion as of September 30, 2007. (source: company press release or website)

Why We Like It:
This play is for the adventuresome crowd. BX hit new all-time lows yesterday near $17.25. Yet today's sharp rebound, thanks to a stock buy back announcement, has produced a three-candlestick bullish reversal pattern. BX is currently facing resistance near $20 and its 10-dma (and its late November lows). The rebound could fail right here. We are suggesting calls right now but this is a higher-risk play and. You may want to wait. You don't have to buy calls immediately. You could wait for a breakout over the 10-dma near $20.60. Or you could wait for a dip back toward today's intraday support near $19.00. Our target is the $24.00-25.00 range. We do not want to hold over the February earnings report.

Suggested Options:
If we can hold up to February expiration we'll have five weeks for this play to work. If BX reports earnings before expiration then we'll exit earlier. We're rolling the dice on this one so we're going for out-of-the money options.

BUY CALL FEB 22.50 BX-BE open interest=795 current ask $0.55

Picked on January 10 at $19.84
Change since picked: + 0.00
Earnings Date 02/11/08 (unconfirmed)
Average Daily Volume: 2.7 million
 

New Puts

None today.
 

New Strangles

Biogen Idec - BIIB - cls: 59.18 chg: +0.78 stop: n/a

Company Description:
Biogen Idec creates new standards of care in therapeutic areas with high unmet medical needs. Founded in 1978, Biogen Idec is a global leader in the discovery, development, manufacturing and commercialization of innovative therapies. (source: company press release or website)

Why We Like It:
This is a lottery ticket play. That means big risk, big reward. BIIB and ELN are expecting news either Friday, January 11th or Monday, January 14th on an FDA approval. The two companies are partners on Tysabri, a multiple sclerosis treatment. Evidently the FDA is near a decision on expanding the market for Tysabri. We are choosing to play January options because the event is supposed to happen within the next two days. The risk is nothing happens to the stock price. With only five or six trading left for January strikes the time premium erosion is going to be very quick and we'll be facing a big percentage loss. However, if the stocks move like we expect then we'll be out of the play on Monday or Tuesday at the latest. Pick one play, either BIIB or ELN.

NOTE: We do not want to open this play if BIIB gaps open tomorrow. If the stock gaps open below $58.50 or above $61.50 we'll abort.

NOTE on ELN: Traders could try a strangle on ELN ($24.65) but there is no $27.50 strike price and we're not comfortable buying the $30.00 call for January. A $25.00 straddle is an possibility but it would cost almost $2.00 at this point.

Suggested Options:
We are suggesting the January options. A strangle involves buying both an out of the money call and an out of the money put. Our estimated cost here is $1.05. We want to sell if either hits $2.50. More aggressive traders may want to aim higher.

BUY CALL JAN 65.00 IHD-AM open interest=7690 current ask $0.45
-and-
BUY PUT JAN 55.00 IDK-MK open interest=13090 current ask $0.60

Picked on January 10 at $ 59.18
Change since picked: + 0.00
Earnings Date 02/14/08 (unconfirmed)
Average Daily Volume = 4.4 million
 

New Play Archives