New Plays, Wednesday, 04/16/2008
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Call Options Plays
Put Options Plays
Strangle Options Plays
Play Editor's Note: The market's strength today was great
to see but we don't want to chase it here. There are a number of stocks that we
do want to watch for potential entry points. We continue to watch FCX and PCU.
Both made pretty big gains today. Both continue to look bullish. MMM is back to
challenging resistance. A move over $81.50-81.75 might be a play. Steel and iron
stocks are hot and NUE looks like it's trying to breakout from its sideways
consolidation. Natural gas is breaking
out and the UNG just closed over
resistance near $50.00. DE just broke through resistance near $90.00. CHL is
breaking out from its two-week trading range.
Google Inc. - GOOG - cls: 455.03 chg: +8.19 stop: n/a
The planet's number one Internet search engine.
Why We Like It:
GOOG has always been a momentum stock but it's also become a bellwether for the
tech sector. There are a lot of expectations for the company's earnings reports
every quarter. Sometimes playing a strangle over the earnings announcement works
like a charm and sometimes it doesn't. We hesitated to add GOOG as a strangle
tonight because the options always look so expensive. However, odds are pretty
good that GOOG will see another massive move on its report. We're looking for a
than 10% move. It may not be all on Friday but within three days of the
earnings announcement. GOOG reports after the bell on Thursday and Wall Street
expects a profit of $4.52 a share. Tomorrow is our only day to open strangle
positions ahead of earnings.
A strangle involves buying both an out of the money call and an out of the money
put. You don't have to choose the same strikes or the same month we do. The
estimate cost for our May option strangle is $14.10. We want to sell if either
option hits $25.00 or more.
BUY CALL MAY $500 GOP-EO open interest=8154 current ask $7.90
BUY PUT MAY $400 GOP-QT open interest=2594 current ask $6.20
FYI: You could try the same strangle with the April $500 call and April $400 put
and it would cost you about $3.00 instead of $14.00 but you'd only get one day
(Friday, April 18th) as April options expire. Probably not a good bet. You'd be
better off and have more fun in Vegas.
Picked on April 16 at $455.03
Change since picked: + 0.00
Earnings Date 04/17/08 (confirmed)
Average Daily Volume = 2.9 million