Option Investor
New Plays

New Option Plays

HAVING TROUBLE PRINTING?
Printer friendly version
Call Options Plays
Put Options Plays
Strangle Options Plays
None AMZN EWZ
    HHH
    MOO

Play Editor's Note: I'm starting to feel like a broken record here. Our market bias is bearish but stocks remain oversold and are way overdue for a bounce. Yet trying to buy calls as stocks bounce from support has been a losing game this past week. We are going to add some neutral strangle strategies. This way it won't matter what direction the market goes. However, nimble traders should be ready for the bounce. Some of the short-term signals I watch are suggesting a rebound soon. Of course we'll try and use any multi-day rally as a new entry point for shorts.

FYI: A few more stocks that I'm watching are: PCP, SYK and XHB. Shares of PCP have pulled back to their March lows. A bounce from here might be a bullish entry point or you could try a neutral strategy. SYK is consolidating sideways but odds are decent that the stock will either be north of $65 or south of $60 by August expiration. Could be a strangle candidate. The XHB homebuilder ETF is trying to bounce from its January lows. You could speculate with some calls or consider another strangle. Use August options.


New Calls

None today.

New Puts

Amazon.com - AMZN - close: 72.00 chg: +0.56 stop: 73.85

Company Description:
Amazon.com, Inc., a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as books, movies, music & games, digital downloads, electronics & computers, home & garden, toys, kids & baby, grocery, apparel, shoes & jewelry, health & beauty, sports & outdoors, and tools, auto & industrial. (source: company press release or website)

Why We Like It:
The market downturn has pulled AMZN toward support near $70.00. If stocks continue to drop we would expect AMZN to breakdown under $70.00, which should forecast a decline toward the March lows around $61.50. We're suggesting a trigger to buy puts at $69.75. If triggered our target is $62.50. The Point & Figure chart is already bearish with a $63 target. We do not want to hold over the late July earnings report.

Suggested Options:
Our suggested trigger to buy puts is at $69.75. We're suggesting the August puts. It is up to the individual trader to decide which month and which strike price best suits your trading style and risk.

BUY PUT AUG 72.50 ZQN-TD open interest=1212 current ask $6.00
BUY PUT AUG 70.00 ZQN-TN open interest=1698 current ask $4.80
BUY PUT AUG 65.00 ZQN-TM open interest=1652 current ask $2.96

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/23/08 (unconfirmed)
Average Daily Volume = 7.2 million
 

New Strangles

iShares Brazil - EWZ - cls: 83.06 chg: -0.90 stop: n/a

Company Description:
The iShares MSCI Brazil Index (EWZ) is an exchange traded fund (ETF) that mimics the performance of the MSCI Brazil index.

Why We Like It:
It would be tempting to try and call a bottom in the EWZ with the pull back and minor bounce from its 200-ema. However in this market, trying to pick a bottom has been dangerous. We're going to suggest a strangle instead since this is a pivotal spot for the EWZ. We would try and open positions in the $83.50-82.00 zone.

Suggested Options:
A strangle involves buying both an out of the money call and an out of the money put. We don't care what direction the stock goes as long as it moves one direction. If the equity moves far enough one side of our trade will rise in value to pay for the entire trade and make a profit.

We are suggesting the August options. Our estimated cost is $3.95 We want to sell if either option hits $5.90.

BUY CALL AUG 90.00 EWZ-HR open interest=2305 current ask $2.00
-and-
BUY PUT AUG 75.00 EWQ-TO open interest=9563 current ask $1.95

Picked on July 03 at $ 83.06
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 13.6 million

---

Internet Holders - HHH - cls: 50.25 change: +0.19 stop: n/a

Company Description:
The Internet HOLDRs is an exchange traded fund (ETF) that represents 13 companies in the Internet "industry". Top holdings include AMZN, EBAY, YHOO, and TWX.

Why We Like It:
The HHH has pulled back to significant support. This is a pivotal test for the sector. The HHH should either see a big bounce back to $55 and beyond or breakdown to new lows. We're going to speculate with a strangle. Try and open positions in the $50.50-49.50 zone.

Suggested Options:
A strangle involves buying both an out of the money call and an out of the money put. We don't care what direction the stock goes as long as it moves one direction. If the equity moves far enough one side of our trade will rise in value to pay for the entire trade and make a profit.

We are suggesting the August options. Our estimated cost is $1.60 We want to sell if either option hits $2.45.

BUY CALL AUG 55.00 HHH-HK open interest= 695 current ask $0.70
-and-
BUY PUT AUG 45.00 HHH-TI open interest= 147 current ask $0.90

Picked on July 03 at $ 50.25
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 132 thousand

---

MarketVectors Agribusiness- MOO - close: 57.25 chg: -0.40 stop: n/a

Company Description:
The Market Vectors Agribusiness is an exchange traded fund (ETF) that mimics the performance of the DAXglobal Agribusiness index. A few of its top holdings are: BG, DE, MON, POT, SYT, and MOS.

Why We Like It:
We are tempted to want to call a short-term bottom in the MOO with its pull back and bounce near $55 and its rising simple and exponential 200-dma. Volume has been pretty strong the last two days. However, in this market, gambling on a bottom is tough work. We'd rather speculate with a strangle.

Suggested Options:
A strangle involves buying both an out of the money call and an out of the money put. We don't care what direction the stock goes as long as it moves one direction. If the equity moves far enough one side of our trade will rise in value to pay for the entire trade and make a profit.

We are suggesting the August options. Our estimated cost is $2.10 We want to sell if either option hits $3.15.

BUY CALL AUG 62.00 MYV-HJ open interest= 80 current ask $1.10
-and-
BUY PUT AUG 50.00 MOO-TX open interest= 370 current ask $1.00

Picked on July 03 at $ 57.25
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 745 thousand
 

New Play Archives