New Plays, Tuesday, 01/29/2008
HAVING TROUBLE PRINTING?
Call Options Plays
Put Options Plays
Strangle Options Plays
Play Editor's Note: As I mentioned yesterday the major
market indices continue to bounce toward resistance near last week's highs. The
market's next move depends on investor reaction to the FOMC's decision on
interest rates tomorrow afternoon. Odds are good we could see a sell the news
move after such a big bounce from the January lows but it's anyone's guess. Any
further rally would be very painful for the bears given the multi-year highs on
DJIA 1/100 Index - $DJX - cls: 124.80 chg: +0.96 stop: n/a
The $DJX is a index that represents 1/100th of the Dow Jones Industrial Average.
Why We Like It:
The markets could see another big move following the FOMC's decision on interest
rates tomorrow. Will they cut 25 basis points or 50 points? There is always a
chance they cut more or don't cut at all. Given that most believe they will cut
50 basis points that news should already be "baked in" to the market thus we
have a set up for a sell-the-news event. However, nothing is a guarantee so
we're suggesting a strangle on the $DJX.
A strangle involves buying both an out of the money call and an out of the money
put option. It's a neutral strategy. We don't care what direction the equity
moves as long as it moves big. We're suggesting the February options. Our
estimated cost is $3.36. We want to sell if either option hits $4.85 or more.
BUY CALL FEB 127 DJW-BW open interest=1380 current ask $1.56
BUY PUT FEB 122 DJW-NR open interest= 881 current ask $1.80
Picked on January 29 at $124.80
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = million