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New Option Plays

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Strangle Options Plays
CF None None
GILD    
MOS    
MT    
PKX    

Play Editor's Note: I wanted to list a couple of more candidates here. Keep an eye on SSL. Traders bought the dip in SSL near broken resistance. This could be an entry point here but we'd rather buy a dip near $56.25. COF looks like a potential bearish play. The stock has rallied right to resistance in the $57.50-58.00 zone. If the stock was going to see a correction this would be the place for it to begin. Aggressive traders could buy puts on COF now with a stop above Friday's high. UBB, a Brazilian bank, might also be a bearish candidate. The stock soared from $130ish to $160 on news this past week that S&P had upgraded the country's debt rating. UBB is very short-term overbought and trading right near resistance at $160. I would consider buying puts if UBB traded back into the $159.00-160.00 zone with a very tight stop around $161.50-162.50ish. This would be considered a very speculative play.

New Calls

CF Ind. - CF - close: 134.76 chg: +2.72 stop: 126.45

Company Description:
CF Industries Holdings, Inc., headquartered in Deerfield, Illinois, is the holding company for the operations of CF Industries, Inc. CF Industries, Inc. is a major producer and distributor of nitrogen and phosphate fertilizer products. (source: company press release or website)

Why We Like It:
The fertilizer stocks soared to new all-time highs in mid April and then sold off sharply. It looks like investors are stepping in to buy the dip now that many are 10% to 20% off their highs. At last Thursday's low CF was 20% off its high and coincidentally testing technical support at the 50-dma. Readers could buy calls now but we want to see some confirmation of the rebound. Therefore we are suggesting a trigger to buy calls at $137.50. More conservative traders could wait for a rally over $140 instead. We are using a wide (aggressive, high-risk) stop loss under Thursday's low. You may want to use a much tighter stop loss but remember this can be a very volatile group. If we are triggered at $137.50 our target is the $155.00-160.00 range. FYI: CF is due to present at two different investor/analyst conferences this week on May 6th and May 7th.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 135 CF-FV open interest= 94 current ask $13.10
BUY CALL JUN 140 CF-FW open interest=351 current ask $10.80
BUY CALL JUN 145 CF-FX open interest=569 current ask $ 8.90
BUY CALL JUN 150 CF-FY open interest=195 current ask $ 7.20

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/27/08 (unconfirmed)
Average Daily Volume = 3.1 million

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Gilead Sciences - GILD - close: 53.63 chg: +0.63 stop: 49.99

Company Description:
Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes innovative therapeutics in areas of unmet medical need. The company's mission is to advance the care of patients suffering from life-threatening diseases worldwide. (source: company press release or website)

Why We Like It:
GILD looks ready to run again. The stock hit new highs in early April and then spent the entire month consolidating sideways in the $50-53 zone. That consolidation is now over with Friday's bullish breakout over $53.00. The MACD on the daily chart has also turned bullish again. We're suggesting readers buy calls now although a dip in the $52.50-52.00 zone would work well too. Our target is the $57.50-60.00 range. Don't forget that any time we play a biotech company it should be considered an aggressive, higher-risk trade. There is always risk of some FDA decision or clinical trial result surprising the market and sending the stock gapping one direction or the other.

Suggested Options:
We are suggesting the June calls.

BUY CALL JUN 50.00 GDQ-FJ open interest= 144 current ask $4.70
BUY CALL JUN 52.50 GDQ-FX open interest=2954 current ask $2.95
BUY CALL JUN 55.00 GDQ-FK open interest=3763 current ask $1.60

Picked on May 04 at $ 53.63
Change since picked: + 0.00
Earnings Date 04/16/08 (confirmed)
Average Daily Volume = 8.9 million

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Mosaic - MOS - close: 124.63 change: +2.08 stop: 115.49

Company Description:
The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. Mosaic is a single source provider of phosphates and potash fertilizers and feed ingredients for the global agriculture industry. (source: company press release or website)

Why We Like It:
MOS is another play on the rebound for fertilizer stocks. MOS dipped about 19% from its highs to last week's lows. Traders bought the dip at its 50-dma. The long-term trend is still very much upwards so we want to buy the bounce. However, this is a very volatile group and we'd like to see a little more confirmation. Thus we're suggesting a trigger to buy calls at $126.50. If triggered our first target is the $138.00-140.00 range. We are playing with a very wide, aggressive stop loss at $115.49, just under Thursday's low. You may want to use a tighter stop closer to $120.

Suggested Options:
We're suggesting the June calls. Our trigger is at $126.50.

BUY CALL JUN 125 MTJ-FE open interest=2422 current ask $11.10
BUY CALL JUN 130 MTJ-FF open interest=1796 current ask $ 8.90
BUY CALL JUN 135 MTJ-FG open interest=1869 current ask $ 7.00
BUY CALL JUN 140 MTJ-FH open interest=3207 current ask $ 5.40

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/30/08 (unconfirmed)
Average Daily Volume = 7.4 million

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Arcelor Mittal - MT - close: 89.15 change: +1.55 stop: 85.99

Company Description:
ArcelorMittal is the world's number one steel company, with 310,000 employees in more than 60 countries. (source: company press release or website)

Why We Like It:
Shares of steel maker MT are still trading near all-time highs. Investors have been reluctant to sell it. The recent bounce near $86.00 looks like an entry point. However, we want to see a little confirmation that the rally is still there so we're suggesting a trigger to buy calls at $90.25. While $90.25 will be our official entry point if we saw a dip near $86 again we'd seriously consider taking it. The company is due to report earnings in the next week or two so this should be a short-term play. We don't want to hold over the announcement. If triggered at $90.25 our target is the $99.00-100.00 zone. The P&F chart is very bullish with a $116 target.

Suggested Options:
We are suggesting the June calls. Our trigger is at $90.25.

BUY CALL JUN 85.00 MT-FQ open interest=2875 current ask $7.50
BUY CALL JUN 90.00 MT-FR open interest=4431 current ask $4.80
BUY CALL JUN 95.00 MT-FS open interest=4431 current ask $2.85

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 05/14/08 (unconfirmed)
Average Daily Volume = 3.7 million

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POSCO - PKX - close: 124.64 change: +1.09 stop: 119.75

Company Description:
PKX is a South Korean steel maker.

Why We Like It:
Take a quick look at PKX's chart. The trend is down. Shares have failed at its trendline of lower highs about five times. We suspect that the recent, two-week sideways consolidation is a sign that PKX will break out higher. However, we are listing two different entry points. One entry point is to buy calls on a breakout. The other entry point is to buy puts on a breakdown. If PKX breaks through its trendline we're suggesting a trigger to buy calls at $125.55. You may want to use $126 or $127 since the trendline is not an exact science. If triggered at $125.55 we'll use a stop loss at $119.75. Our target will be the $139.00-140.00 zone. We should expect to see some overhead resistance at the 100-dma and exponential 200-dma near $130-133. Now if PKX breaks down then we're suggesting a trigger to buy puts at $119.50 with a stop loss at $125.05. Our downside target will be the $105.00-100.00 zone. NOTE: We would consider this a slightly more aggressive play for two reasons. First, PKX is prone to gap openings as the U.S. traded shares adjust to trading overseas the night before. Second, the spreads on the options are pretty wide and that immediately puts us, as option traders, at a disadvantage.

Suggested Options:
We are suggesting the June calls. Our trigger is $125.55.

BUY CALL JUN 120 PKX-FD open interest= 12 current ask $11.10
BUY CALL JUN 125 PKX-FE open interest= 44 current ask $ 8.40
BUY CALL JUN 130 PKX-FF open interest= 17 current ask $ 6.10
BUY CALL JUN 135 PKX-FG open interest= 28 current ask $ 4.30

If PKX hits our trigger at $119.50 to buy puts then we'd suggest the June puts in the $125, 120, 115, 110 strikes.

Remember, it's up to you, the individual trader, to decide which month and which strike price best suits your trading style and risk.

Picked on May xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/16/08 (unconfirmed)
Average Daily Volume = million
 

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New Strangles

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