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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
FXE None ETN
    UBS
    XLF

New Calls

CurrencyShares Euro - FXE - cls: 159.44 chg: +1.45 stop: 156.75

Company Description:
The CurrencyShares Euro Trust (FXE) is an exchange traded fund (ETF) that mimics the price of the Euro in dollars.

Why We Like It:
The dollar is plunging and that is lifting the Euro currency. One way to play it is the FXE. The FXE has been consolidating sideways the past couple of months and has rallied back to resistance near $160 ($1.60/Euro). We are suggesting two different entry points to get long calls on the FXE. Our first entry point is a breakout to new highs at $160.55. Our second entry point would be a pull back to $158.00. Our stop loss is at $156.75. If we get filled at $160.55 we'll adjust the stop higher. Our five-week target is $164.50. Our ten-week target is $169.50.

Suggested Options:
We are suggesting the August and September calls. Strikes are available at $1.00 increments.

BUY CALL AUG 160.00 FLN-HD open interest= 65 current ask $1.75
BUY CALL AUG 165.00 FLN-HI open interest= 10 current ask $0.45

BUY CALL SEP 165.00 FLN-II open interest= 95 current ask $0.95
BUY CALL SEP 170.00 FLN-IN open interest= 14 current ask $0.35

Annotated Chart:

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 909 thousand
 

New Puts

None today.
 

New Strangles

Eaton - ETN - close: 80.93 change: -0.50 stop: n/a

Company Description:
Eaton Corporation is a diversified power management company with 2007 sales of $13 billion. Eaton is a global technology leader in electrical systems for power quality, distribution and control; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulics and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety. (source: company press release or website)

Why We Like It:
ETN is due to report earnings on Tuesday morning. The last couple of earnings reports have produced some big post-earnings moves. We are going to try and capture any post-earnings volatility with a strangle. We're listing a strangle with August options or a very speculative (higher-risk) strangle with July options. The plan is to open positions on Monday near the closing bell so we'll fill in the estimated cost and exit targets on Monday's newsletters. Don't forget - Monday is our only day to open positions ahead of earnings!

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 stock moves far enough one side of our trade will rise in value and pay for the entire trade and make a profit.

These prices will change tomorrow. We want to open positions as close to $80.00 as possible. However we would use the $81.00-79.00 zone as an range to launch strangle positions.

Estimated cost with August options is $x.xx (to be filled in on Monday). We want to sell if either option hits $x.xx (TBD).

BUY CALL AUG 85.00 ETN-HQ open interest= 183 current ask $2.55
-and-
BUY PUT AUG 75.00 ETN-TO open interest= 158 current ask $2.10

- Or if you want to be really aggressive try the July options, which expire in five days.

Estimated cost with July options is $x.xx (to be filled in on Monday). We want to sell if either option hits $x.xx (TBD).

BUY CALL JUL 85.00 ETN-GQ open interest=2731 current ask $1.15
-and-
BUY PUT JUL 75.00 ETN-SO open interest=2644 current ask $0.70

Picked on July 13 at $ 80.93
Change since picked: + 0.00
Earnings Date 07/15/08 (confirmed)
Average Daily Volume = 2.2 million

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UBS Ag - UBS - close: 19.49 change: -0.41 stop: 20.75

Company Description:
UBS is a global money-center bank based in Switzerland.

Why We Like It:
Shares of UBS have been vacillating around the $20.00 zone and it offers a good spot to consider strangle positions. The financial stocks are extremely oversold and way overdue for a big bounce but the news flow just seems to get worse and worse. We're expecting a big move one way or the other relatively soon. Try and open positions in the $19.00-21.00 zone. The closer to $20.00 the better. NOTE: If UBS gaps open below $19.00 the play will remain unopened and we'll re-evaluate on Monday.

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 stock moves far enough one side of our trade will rise in value and pay for the entire trade and make a profit.

We are listing two different strangles. Pick the one that best suits your trading style and risk.

UBS Strangle #1) This uses the August $22.50 calls and $17.50 puts. Our estimated cost is $1.90. We want to sell if either option hits $3.00.

BUY CALL AUG 22.50 UBS-HX open interest= 931 current ask $0.80
-and-
BUY PUT AUG 17.50 UBS-TW open interest= 524 current ask $1.10

UBS Strangle #2) This uses the August $25.00 calls and $15.00 puts. Our estimated cost is $0.90. We want to sell if either option hits $1.90.

BUY CALL AUG 25.00 UBS-HE open interest=1793 current ask $0.35
-and-
BUY PUT AUG 15.00 UBS-TC open interest= 0 current ask $0.55

Picked on July 13 at $19.49
Change since picked: + 0.00
Earnings Date 08/12/08 (unconfirmed)
Average Daily Volume: 7.3 million

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FinancialSector SPDR - XLF - cls: 18.68 chg: -0.54 stop: n/a

Company Description:
The Select Sector (Financial) SPDR trust is an exchange traded fund (ETF) that represents the banks, diversified financials, insurance, and real estate.

Why We Like It:
The U.S. financial sector continues to see a huge amount of volatility. The group is setting up for a monumental bounce or a continuation of the crash. The news out on Friday about the government closing down IndyMac bank should send the financials gapping lower on Monday morning. However, where the sector goes after the initial sell-off is the real question. We are suggesting that readers open a strangle positions on the gap down Monday morning. We don't know where it's going to gap down so we may have to adjust the options involved in this strangle. If the XLF doesn't actually gap open then give it about five minutes and then open positions.

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 stock moves far enough one side of our trade will rise in value and pay for the entire trade and make a profit.

I am guessing that the XLF may open on Monday morning around $18.00, give or take 25 cents. We're suggesting the following options: the August $20.00 calls and the August $16.00 puts. If the XLF opens at $19.00 then adjust the strikes up $1.00. If the XLF opens at $17.00 then adjust the strikes down $1.00, etc.

We will fill in the estimated prices based on where the XLF opens on Monday morning. Our estimated cost for this play is $(TBD). We want to sell if either option hits $(TBD). Try and keep your investment balanced on both sides of this play.

BUY CALL AUG 20.00 XLF-HT open interest=41,562 current ask $0.95
-and-
BUY PUT AUG 16.00 XJZ-TP open interest=14,303 current ask $0.51

Picked on July xx at $ xx.xx <-- Monday morning
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 128 million
 

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