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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
BNI None None
CEO    
DE    
DIA    
DO    
SPY    

Play Editor's Note: The market is very short-term oversold and way overdue for a bounce. I think we're setting up for that bounce right now. Not everyone agrees. The important note here is that I think it's just a bounce. I do think the market will see lower lows this year. I've said it before that even in a bear market we'll get some rallies and they tend to be sharp. The challenge is trying to catch them. While I expect this to be a multi-day bounce we need to plan for it to fail.


New Calls

Burlington Northern - BNI - cls: 97.62 chg: -2.27 stop: 94.95

Company Description:
A subsidiary of Burlington Northern Santa Fe Corporation (NYSE:BNI), BNSF Railway Company operates one of the largest North American rail networks, with about 32,000 route miles in 28 states and two Canadian provinces. BNSF is among the world's transporters of intermodal traffic, moves more grain than any other American railroad, carries the components of many of the products we depend on daily, and hauls enough low-sulfur coal to generate about ten percent of the electricity produced in the United States. (source: company press release or website)

Why We Like It:
The railroad stocks broke down from their bullish trend a couple of weeks ago. However, that doesn't mean that the group won't see some oversold bounces. It looks like BNI is setting up for one of those rebounds today. Shares dipped toward $95.00, which as previous resistance should now act as new support. The afternoon bounce today is our entry point to buy calls. We're suggesting a stop loss at $94.95. There is potential resistance near $100.00 and the 10-dma near $100.50. Our Short-term target is the $104.50 mark. Please tonight's play editor's note on strategy.

Suggested Options:
This should be a short-term bounce so using July options should be okay. Julys expire in less than three weeks. We're listing August options as alternatives.

BUY CALL JUL 95.00 BNI-GS open interest=5116 current ask $4.70
BUY CALL JUL 100.0 BNI-GT open interest=4031 current ask $2.05
BUY CALL JUL 105.0 BNI-GA open interest=6310 current ask $0.75

BUY CALL AUG 100.0 BNI-HT open interest= 132 current ask $4.40
BUY CALL AUG 105.0 BNI-HA open interest= 576 current ask $2.55

Picked on July 01 at $ 97.62
Change since picked: + 0.00
Earnings Date 07/24/08 (confirmed)
Average Daily Volume = 3.3 million

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CNOOC Ltd. - CEO - close: 171.36 chg: -2.18 stop: 164.95

Company Description:
CNOOC ltd. is China's largest producer of offshore crude oil and natural gas and one of the largest independent oil and gas exploration and production companies in the world. The Group mainly engages in oil and natural gas exploration, development, production and sales. (source: company press release or website)

Why We Like It:
Trading CEO tends to be a higher-risk play. The stock is traded as an ADR on the NYSE and shares gap open, up or down, almost every morning as it adjusts to trading back home in China. This is also a higher risk play because the spreads on the options can be abnormally wide and that immediately puts us at a disadvantage. If you can handle the volatility this might be a play. Shares have been consolidating for a month now and look poised to breakout higher again. Traders bought the dip near CEO's 200-dma this afternoon. We are suggesting new positions now. More conservative traders may want to wait for a new rise over $175.00 or $176.00 before initiating positions. We have multiple targets. Our first target is $179.50. Our second target is $184.50. Finally, our very aggressive target is $195.00. If you are aiming for $195 we suggest you use the August calls. FYI: The Point & Figure chart has reversed into a new bullish signal with a $204 target. Please tonight's play editor's note on strategy.

Suggested Options:
We are suggesting both the July and August calls. Julys expire in three weeks. If you're aiming for the aggressive target consider the August strikes.

BUY CALL JUL 175.00 CEO-GO open interest= 81 current ask $4.60
BUY CALL JUL 180.00 CEO-GV open interest=321 current ask $2.80
BUY CALL JUL 185.00 CEO-GW open interest=109 current ask $1.60

BUY CALL AUG 180.00 CEO-HV open interest= 5 current ask $7.30
BUY CALL AUG 190.00 CEO-HX open interest= 1 current ask $4.20

Picked on July 01 at $171.36
Change since picked: + 0.00
Earnings Date 08/25/08 (unconfirmed)
Average Daily Volume = 500 thousand

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Deere & Co. - DE - close: 73.42 change: +1.29 stop: 69.95

Company Description:
Deere & Company is the world's leading provider of advanced products and services for agriculture and forestry and a major provider of advanced products and services for construction, lawn and turf care, landscaping and irrigation. (source: company press release or website)

Why We Like It:
With the market poised to deliver an oversold bounce shares of DE could be a winner. The stock fell toward support near $70.00 a few days ago and have managed to hold that line in spite of new relative lows for the major averages. We're suggesting readers buy this bounce with a tight stop under $70.00. Our target is the $77.50-78.00 zone.

Suggested Options:
We expect this to be a very short-term bounce so we're suggesting the July calls, which expire in less than three weeks.

BUY CALL JUL 70.00 DE-GN open interest=1141 current ask $4.60
BUY CALL JUL 75.00 DE-GO open interest=5788 current ask $1.65

Picked on July 01 at $ 73.42
Change since picked: + 0.00
Earnings Date 08/13/08 (unconfirmed)
Average Daily Volume = 5.8 million

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DIAMONDS - DIA - close: 113.77 change: +0.35 stop: 111.69

Company Description:
The DIAMONDS Trust, Series 1, is an exchange traded fund (etf) designed to mimic the Dow Jones Industrial Average.

Why We Like It:
We are gambling on a short-term bottom in the DJIA. Today's session has produced a bullish engulfing candlestick and volume was more than twice the norm. Use a tight stop under today's low. Our target is the $118.00-119.00 range (11,800-11,900 on the DJIA).

Suggested Options:
We expect this to be a very short-term bounce so we're suggesting the July calls, which expire in less than three weeks.

BUY CALL JUL 114.00 DIA-GJ open interest=4038 current ask $2.03
BUY CALL JUL 116.00 DIA-GL open interest=6024 current ask $1.10
BUY CALL JUL 118.00 DIA-GN open interest=9178 current ask $0.50

Picked on July 01 at $113.77
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 14.5 million

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Diamond Offshore - DO - cls: 139.70 chg: +0.56 stop: 135.85

Company Description:
Diamond Offshore provides contract drilling services to the energy industry around the globe and is a leader in deepwater drilling. (source: company press release or website)

Why We Like It:
I mentioned DO as an potential play yesterday. The stock dipped toward short-term support near $136 and its 50-dma and bounced. This looks like a new bullish entry point to buy calls. Keep an eye on oil. Even though DO is an oil services company, which should do well no matter what with oil above $100, the stock and the sector could sell off if oil reverses sharply. We have two targets. Our first target is $147.00. Our second target is $155. If DO can trade over $142 it will produce a new triple-top breakout buy signal on the Point & Figure chart. If you're just aiming for the $147 target then July options should be fine. If you're aiming higher then the August options would be better.

Suggested Options:
Short-term traders aiming for $147 can use the July options. If you're aiming higher we suggest August calls.

BUY CALL JUL 135.00 DO-GG open interest= 588 current ask $7.50
BUY CALL JUL 140.00 DO-GU open interest=1899 current ask $4.60
BUY CALL JUL 145.00 DO-GV open interest=1729 current ask $2.55

BUY CALL AUG 145.00 DO-HV open interest= 194 current ask $5.60
BUY CALL AUG 150.00 DO-HW open interest= 40 current ask $4.00

Picked on July 01 at $139.70
Change since picked: + 0.00
Earnings Date 07/24/08 (confirmed)
Average Daily Volume = 2.0 million

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S&P SPDRs - SPY - close: 128.28 chg: +0.40 stop: 125.85

Company Description:
The (SPY) SPDRs is the exchanged traded fund (etf) designed to mimic the S&P 500 index.

Why We Like It:
I told readers over the weekend that if the S&P 500 (SPY) dipped toward the March lows to expect a bounce and use it as a bullish entry point. We got that bounce today. We're suggesting calls with a tight stop loss. There is potential resistance about every two or three points. Our target is the $132.25-132.50 range.

Suggested Options:
We expect this to be a very short-term bounce so we're suggesting the July calls, which expire in less than three weeks. Strikes are available in $1.00 increments.

BUY CALL JUL 128.00 SPY-GX open interest=17709 current ask $2.78
BUY CALL JUL 130.00 SPY-GZ open interest=34067 current ask $1.72
BUY CALL JUL 132.00 SPY-GB open interest=38392 current ask $0.95

Picked on July 01 at $128.28
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 215 million
 

New Puts

None today.
 

New Strangles

None today.
 

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