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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
ACH AIG None
MT COF  
  HUM  
  RE  

Play Editor's Note: Alas hopes for a spring rally may have died. It was just a few days ago that I warned readers that we were probably facing a bear market rally. While I thought the market may have put in a bottom several days ago there has been no follow through on the bullish breakouts. Once again the path of least resistance appears to be down. Here's a few more stocks I'm watching. BOOM might be a bullish candidate over $45.75 or maybe on a dip or bounce near $43.00. CLF looks tempting if it can breakout past resistance at $125 but beware additional resistance near $127.50. GR looks bearish but I'd probably wait for a breakdown under support near $56.00. HANS also looks bearish but stop loss placement could be a challenge!


New Calls

Aluminum Corp. of China - ACH - cls: 40.80 chg: +1.49 stop: 37.45

Company Description:
Aluminum Corporation of China Limited (CHALCO) was established as a joint stock limited company in the Peoples Republic of China on September 10, 2001 by way of promotion by Aluminum Corporation of China (CHINALCO), Guangxi Investment (Group) Co., Ltd. and Guizhou Provincial Materials Development and Investment Corporation. (source: company press release or website)

Why We Like It:
Many of the metal and steel stocks have been showing relative strength. ACH is an aluminum play and it looks like the stock has bottomed. Last week's breakout over round-number resistance near $40.00 is a bullish entry point. We are suggesting call positions now although if you're patient a better entry point would be a dip in the $40.25-39.75 region. We are setting two targets. Our conservative target is the $44.85-45.00 range. Our more aggressive target is the $48.50-50.00 zone.

Suggested Options:
We are suggesting the May calls.

BUY CALL MAY 40.00 ACH-EH open interest=1126 current ask $4.50
BUY CALL MAY 45.00 ACH-EI open interest=4475 current ask $2.45

Picked on March 30 at $ 40.80
Change since picked: + 0.00
Earnings Date 03/18/08 (unconfirmed)
Average Daily Volume = 1.8 million

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Arcelor Mittal - MT - close: 80.34 chg: +1.49 stop: 76.95

Company Description:
ArcelorMittal is the world's largest and most global steel company, with 310,000 employees in more than 60 countries. The company brings together the world's number one and number two steel companies, Arcelor and Mittal Steel. (source: company press release or website)

Why We Like It:
Last week's bullish breakout over resistance near $80.00 produced a major buy signal on MT's Point & Figure chart. The P&F chart shows a quintuple-top breakout buy signal with a $98 target, which is likely to rise as the rally continues. Our challenge is the generally weak market conditions so we want to see confirmation by MT. Thus we're suggesting readers use a trigger at $81.55 to buy calls. If triggered our target is the $89.00-90.00 zone. We're suggesting a stop at $76.95 but more conservative traders could try and play with a tighter stop near $78.30 instead.

Suggested Options:
We are suggesting the May calls although Aprils and Junes have more open interest.

BUY CALL MAY 75.00 MT-EO open interest= 3 current ask $9.10
BUY CALL MAY 80.00 MT-EP open interest=196 current ask $5.90
BUY CALL MAY 85.00 MT-EQ open interest=143 current ask $3.60

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 05/15/08 (unconfirmed)
Average Daily Volume = 4.1 million
 

New Puts

Amer.Intl.Group - AIG - cls: 42.80 chg: -0.66 stop: 45.11

Company Description:
American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. (source: company press release or website)

Why We Like It:
Financials and insurance continue to trend lower. AIG just produced another failed rally and lower high inside its bearish channel last week. We're suggesting puts now or on a failed rally near $45.00. Conservative traders could target $40.00. We are aiming for the bottom of the channel in the $37.00-35.00 zone. We do not want to hold over the early May earnings report.

Suggested Options:
We are suggesting the May puts.

BUY PUT MAY 45.00 AIG-QI open interest=26231 current ask $4.75
BUY PUT MAY 40.00 AIG-QH open interest=35061 current ask $2.57

Picked on March 30 at $ 42.80
Change since picked: + 0.00
Earnings Date 05/08/08 (unconfirmed)
Average Daily Volume = 26.2 million

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Capital One - COF - close: 48.99 chg: -1.48 stop: 52.55

Company Description:
Capital One Financial Corporation is a financial holding company whose subsidiaries collectively had $83.0 billion in deposits and $151.4 billion in managed loans outstanding as of December 31, 2007. (source: company press release or website)

Why We Like It:
Financials led the market lower this past week and Friday was no exception after one industry analyst claimed that the sector would trade down 25% before year end. Considering our current situation with a consumer-led recession in the U.S. we can't imagine that COF is going to have a very good quarter when they report earnings. We don't want to hold over the report but that still gives us two weeks to catch any pre-earnings weakness. The stock recently produced another failed rally under resistance near $57.50. Friday's decline under round-number, psychological support at $50.00 looks like another entry point for shorts. We do want to point out that one challenge for the bears is the P&F chart. COF has pulled back to P&F chart support, which can be a tough barrier to crack. We are suggesting puts now with COF under $50.00. Our target is the $42.00-40.00 zone. FYI: The P&F chart points to $40. The most recent data lists short interest at more than 10% of the 368 million-share float. That is slightly above average and raises the risk of a short squeeze.

Suggested Options:
We do not want to hold over the mid April earnings but we're still suggesting the May puts.

BUY PUT MAY 50.00 COF-QJ open interest=6454 current ask $5.50
BUY PUT MAY 45.00 COF-QI open interest= 552 current ask $3.40
BUY PUT MAY 40.00 COF-QH open interest=13258 current ask $2.00

Picked on March 30 at $ 48.99
Change since picked: + 0.00
Earnings Date 04/17/08 (unconfirmed)
Average Daily Volume = 10.2 million

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Humana Inc - HUM - cls: 45.20 chg: -1.49 stop: 48.01

Company Description:
Humana Inc., headquartered in Louisville, Kentucky, is one of the nations largest publicly traded health and supplemental benefits companies, with approximately 11.5 million medical members. Humana is a full-service benefits solutions company, offering a wide array of health and supplementary benefit plans for employer groups, government programs and individuals. (source: company press release or website)

Why We Like It:
Oh how the mighty have fallen! It was just over a month ago HUM was looking bullish with a bounce from a multi-year trendline of support (near $65-66). Since then the stock has collapsed along with rival Wellpoint (WLP). Our first thought is that all the bad news should be priced into HUM already but that doesn't seem to be the case. HUM's oversold bounce has run out of steam and the stock is rolling over again. Currently the P&F chart is so bearish it points to a target of zero ($0.00). If HUM could move over $48.00 it would reverse into a new bullish buy signal. We are putting our stop loss at $48.01. We are suggesting puts at current levels or on a failed rally near $46.00. Our first target is $40.50-40.00. We'll consider an aggressive target as the play progresses.

Suggested Options:
We are suggesting the May puts but we do not want to hold over the April earnings report.

BUY PUT MAY 50.00 HUM-QJ open interest=2579 current ask $6.60
BUY PUT MAY 45.00 HUM-QI open interest= 473 current ask $3.60
BUY PUT MAY 40.00 HUM-QH open interest= 459 current ask $1.80

Picked on March 30 at $ 45.20
Change since picked: + 0.00
Earnings Date 04/28/08 (unconfirmed)
Average Daily Volume = 4.4 million

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Everest Re Group - RE - cls: 88.61 chg: -0.20 stop: 91.75

Company Description:
Everest Re Group, Ltd. is a Bermuda holding company that operates through the following subsidiaries: Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. Everest Reinsurance (Bermuda), Ltd., including through its branch in the United Kingdom, provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the U.S. Everest Indemnity Insurance Company offers excess and surplus lines insurance in the U.S. (source: company press release or website)

Why We Like It:
RE is another insurance-related stock that is trading in bearish form. The stock's recent bounce from its trendline of lower lows has rolled over. The drop back under $90.00 looks like a new entry point for puts. The weekly chart suggests there is support near $85.00 but odds look better that RE will drop back to its trendline of lower lows again. We are aiming for the $83.00-82.00 zone. The P&F chart is bearish with a $74 target. We do not want to hold over the late April earnings report.

Suggested Options:
We are suggesting the May puts.

BUY PUT MAY 90.00 RE-QR open interest= 71 current ask $4.60
BUY PUT MAY 85.00 RE-QQ open interest= 0 current ask $2.50

Picked on March 30 at $ 88.61
Change since picked: + 0.00
Earnings Date 04/23/08 (unconfirmed)
Average Daily Volume = 601 thousand
 

New Strangles

None today.
 

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