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New Calls

United States Oil - USO - close: 101.04 chg: +1.05 stop: 97.40

Company Description:
The United States Oil (USO) fund is an exchange traded fund (ETF) that mimics the performance of West Texas Intermediate (WTI) light, sweet crude oil.

Why We Like It:
We are going to try calls on the USO again. After a 20% decline this oil ETF is poised to bounce. The greatest challenge is the volatility, which stopped us out last week. The current situation with Iran is only going to get worse in the next three to five months. If something were to happen, like an Israeli air strike on Iran, crude oil would shoot up $80-$100 a barrel overnight as Iran tries to shut down the Straits of Hormuz. We are suggesting calls on the USO. Right now our target is $109.50. We're considering a secondary, more aggressive target near $115.

Link to map of Persian Gulf

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

BUY CALL SEP 100.00 IYS-IV open interest=2612 current ask $7.30
BUY CALL SEP 105.00 IYS-IA open interest=1803 current ask $5.10
BUY CALL SEP 110.00 IYS-IF open interest=1837 current ask $3.50

Picked on August 03 at $101.04
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 14.7 million


CBOE Volatility Index - VIX - close: 22.57 chg: -0.37 stop: n/a

Company Description:
VIX measures market expectation of near term volatility conveyed by stock index option prices. The original VIX was constructed using the implied volatilities of eight different OEX option series so that, at any given time, it represented the implied volatility of a hypothetical at-the-money OEX option with exactly 30 days to expiration. The New VIX still measures the market's expectation of 30-day volatility, but in a way that conforms to the latest thinking and research among industry practitioners. The New VIX is based on S&P 500 index option prices and incorporates information from the volatility "skew" by using a wider range of strike prices rather than just at-the-money series. (source: company press release or website)

Why We Like It:
Think about what the market is facing. Banks are not lending to each other and borrowing from the Fed is at record levels. Analysts expect another wave of write downs to the tune of $500 billion. The FDIC is closing banks every week now. Inflation is rising. The economy is losing jobs. Oil is still near record levels. Iran's saber-rattling is heating up as the West gets tougher on the nuclear issue. Housing prices are still in decline. We're facing the worst two months of the year for stocks with August and September directly ahead. It would appear that odds are growing for another market sell-off in the next several weeks. We're suggesting a very speculative call position on the VIX to capture any such sell-off. Normally if the stock market moves sharply lower the VIX tends to surge higher. Right now the VIX actually looks poised to move lower but that could change in a heartbeat but it's another reason we're calling this a very speculative play. We're gambling on another market meltdown before September's option expiration. Our target is $29.75.

Suggested Options:
We are suggesting the September calls.

BUY CALL SEP 25.00 VIX-IE open interest=71293 current ask $1.55
BUY CALL SEP 27.50 VIX-IY open interest=17040 current ask $1.00
BUY CALL SEP 30.00 VIX-IF open interest=34997 current ask $0.65

Picked on August 03 at $ 22.57
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = x million

New Puts

VISA Inc. - V - close: 71.73 change: -1.33 stop: 72.55

Company Description:
Visa Inc. operates the worlds largest retail electronic payments network providing processing services and payment product platforms. (source: company press release or website)

Why We Like It:
Visa rallied ahead of its earnings report last week and then immediately sold off after beating estimates by 11 cents. Everyone seems to love this stock and they quickly point out that Visa doesn't have credit risk since they just process the transactions. Yet the stock is in a two-month bearish trend of lower highs. This past week has produced a bearish reversal under that line. We're suggesting that readers buy puts on Visa if the stock trades at $69.45 or lower. If triggered we have two targets. Our first target is $65.25. Our second target is $61.00.

Suggested Options:
We are suggesting the September puts.

BUY PUT SEP 70.00 V-UN open interest=4651 current ask $4.40
BUY PUT SEP 67.50 V-UU open interest=2998 current ask $3.30
BUY PUT SEP 65.00 V-UM open interest=5137 current ask $2.40

Picked on August xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/30/08 (confirmed)
Average Daily Volume = 14 million

New Strangles

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