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New Plays

New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
USO None LM
    NFLX

New Calls

United States Oil - USO - cls: 100.02 chg: -3.30 stop: 96.99

Company Description:
The USO is an exchange traded fund that tracks the performance of West Texas Intermediate (WTI) light, sweet crude oil futures.

Why We Like It:
The sell-off in crude oil is looking overdone. The USO has fallen from $120 to $100 in two weeks. The $100 region is the 38.2% Fibonacci retracement of its 2008 rally. It would be tempting to buy it here at $100 but we could see a dip to technical support at its 100-dma near 98.50. We are suggesting readers buy calls on the USO in the $98.75-98.50 region. We're listing a stop loss at $96.99. More conservative traders may want to use a tighter stop. The May 15, 2008 low was $97.69 so a stop under this price could work. Our short-term target is the $106.00 mark. This is a very aggressive trade. We're trying to pick a short-term bottom during a sell-off. I strongly suggest that readers wait for signs of a bounce first before initiating call positions.

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

BUY CALL AUG 100.00 IYS-HV open interest=1952 current ask $5.10
BUY CALL AUG 105.00 IYS-HA open interest=1679 current ask $3.10

Picked on July xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 14.6 million
 

New Puts

None today.
 

New Strangles

Legg Mason - LM - close: 40.20 chg: +3.48 stop: n/a

Company Description:
Legg Mason is a global asset management firm, with approximately $950 billion in assets under management as of March 31, 2008. The company provides active asset management in many major investment centers throughout the world. Legg Mason is headquartered in Baltimore, Maryland. (source: company press release or website)

Why We Like It:
Shares of LM have been rising sharply with the rebound in the financials. Volume on today's 9% gain was way above the norm. Expectations may be improving for the company's upcoming earnings report due out Friday morning. Wall Street estimates are at 13 cents a share. We suspect that LM could see some big moves post-earnings. We're suggesting a strangle to capture any volatility. Try and keep your entry point in the $41.00-39.00 zone. The closer to $40.00 the better. Tomorrow (Thursday) is our only day to open positions ahead of the announcement.

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 suggesting the August options below. Our estimated cost is $3.15. We want to sell if either option hits $4.85 or more.

BUY CALL AUG 45.00 LM-HW open interest= 931 current ask $1.55
-and-
BUY PUT AUG 35.00 LM-TG open interest=4136 current ask $1.60

Picked on July 23 at $ 40.20
Change since picked: + 0.00
Earnings Date 07/25/08 (confirmed)
Average Daily Volume = 3.1 million

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Netflix - NFLX - close: 27.98 change: +0.76 stop: n/a

Company Description:
Netflix, Inc. is the world's largest online movie rental service, with more than eight million subscribers. For one low monthly price, Netflix members can get DVDs delivered to their homes and can instantly watch movies and TV episodes streamed to their TVs and PCs, all in unlimited amounts. (source: company press release or website)

Why We Like It:
NFLX has a history of producing some decent moves on its earnings report. The last earnings report, back in April, saw a massive sell-off. Investors have been waiting for the upcoming report and shares have coiled into a neutral pennant-pattern as Wall Street waits for the results. Estimates are running at 40 cents a share. NFLX reports on Friday morning so tomorrow (Thursday) is our only day to open strangle positions ahead of the announcement. Try and keep your investment balanced on both side of the trade. If we don't see a big enough move on Friday we might bail out early to try and cut our losses.

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 suggesting the August options below. Our estimated cost is $1.20. We want to sell if either option hits $2.20 or more.

If you don't like the options we chose you could use the $30 calls and $25 puts or do a $27.50 straddle.

BUY CALL AUG 32.50 QNQ-HT open interest=10273 current ask $0.70
-and-
BUY PUT AUG 22.50 QNQ-TX open interest= 314 current ask $0.50

Picked on July 23 at $ 27.98
Change since picked: + 0.00
Earnings Date 07/25/08 (confirmed)
Average Daily Volume = 1.3 million
 

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