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New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
AGN None None
TDW    
TOL    
WM    

Play Editor's Note: I want to remind readers that we remain in a bear market. We just experienced a bear-market rally, which is normally very sharp. Last week's rebound was extraordinarily fast and powerful due to government intervention and some government manipulation of the short-trading rules ahead of an options expiration weekend. It may have very well been a turning point for the market but we won't know that until it's a good distance back in our rear view mirror. I do expect the bounce to continue but after a 1,000 point rebound in the DJIA and a 9.8% bounce in the NASDAQ Composite it's time for a little profit taking. I'm adding some bullish candidates but we are looking for a dip first! FYI: Check out XL. It's on the list of financial stocks that can't be shorted. Shares look like they are bouncing from a bullish double-bottom. It might be a bullish candidate.


New Calls

Allergan - AGN - close: 58.68 change: +1.67 stop: 54.95

Company Description:
Founded in 1950, Allergan, Inc., with headquarters in Irvine, California, is a multi-specialty health care company that discovers, develops and commercializes innovative pharmaceuticals, biologics and medical devices that enable people to live life to its greatest potential - to see more clearly, move more freely, express themselves more fully. (source: company press release or website)

Why We Like It:
It was a challenge to find a bullish candidate that had not exploded higher but still looked strong enough to buy right now. AGN appears to fit that bill. The stock broke out higher several days ago on a positive Botox study. Shares consolidated those gains and have now bounced twice from the $56.00 level. Friday's intraday low of $55.50 looks like a bad tick. Friday's rebound back above the simple 200-dma looks like a new bullish entry point. We're going to list a stop loss at $54.95 since the $55.00 level should be round-number support bolstered by technical support at the 50-dma and 100-dma. More conservative traders may want to use a stop closer to $56.00 instead. We do think the market will dip this week following the huge Thursday-Friday rebound. Patient traders might want to look for a dip back toward $57.50-57.00 before initiating positions in AGN. Our target is the $64.00-65.00 range. The Point & Figure chart is bullish with a $75 target.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 60.00 AGN-JL open interest=8728 current ask $2.25
BUY CALL OCT 65.00 AGN-JM open interest=6772 current ask $0.70

Picked on September 21 at $ 58.68
Change since picked: + 0.00
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 2.4 million

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Tidewater Inc. - TDW - cls: 62.41 chg: +3.67 stop: 57.90

Company Description:
Tidewater Inc. owns 448 vessels, the worlds largest fleet of vessels serving the global offshore energy industry. (source: company press release or website)

Why We Like It:
The oil service stocks showed a lot of strength on Friday following another $6.00 gain in crude oil. Shares of TDW broke through resistance near $60.00, near $62.00, and its 100-dma. I suspect the group will correct a bit after such a big bounce and we want to buy the dip in TDW. We're suggesting a trigger to buy calls on TDW in the $60.75-60.00 zone. If triggered we're listing two targets. Our first target is $64.90. Our second target is $68.00.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 60.00 TDW-JL open interest=3744 current ask $4.70
BUY CALL OCT 65.00 TDW-JM open interest=2655 current ask $2.10

Picked on September xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/30/08 (unconfirmed)
Average Daily Volume = 1.4 million

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Toll Brothers - TOL - close: 26.84 change: +1.89 stop: 23.95

Company Description:
Toll Brothers, Inc. is the nation's leading builder of luxury homes. The Company began business in 1967. The Company serves move-up, empty-nester, active-adult and second-home home buyers and operates in 21 states. (source: company press release or website)

Why We Like It:
The DJUSHB home construction index soared 8% on Friday as investors jumped into housing stocks hoping the government's latest rescue efforts will calm Wall Street and lend consumers some confidence. Plus, a stronger focus on illegal naked short selling can't hurt this group. The homebuilders are some of the most shorted stocks in the market. Shares of TOL spiked to a new 52-week high at $28.00 before trimming its gains. The recent move in TOL looks like a bull flag pattern. After such a big market rally we believe stocks will pause/pull back to catch their breath. We're suggesting readers buy calls on TOL with a dip in the $26.00-25.00 zone. If triggered our target is $29.90. FYI: The most recent data listed short interest at 17% of TOL's 130-million-share float. Readers should also note that there is a homebuilder analyst conference this week, which might produce some news for the sector.

Suggested Options:
We are suggesting the October calls.

BUY CALL OCT 25.00 TEP-JE open interest=3532 current ask $3.20
BUY CALL OCT 27.50 TEP-JT open interest=4731 current ask $1.70
BUY CALL OCT 30.00 TOL-JF open interest=1179 current ask $0.80

Picked on September xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 12/04/08 (unconfirmed)
Average Daily Volume = 5.1 million

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Washington Mutual - WM - close: 4.25 change: +1.26 stop: n/a

Company Description:
WaMu, through its subsidiaries, is one of the nation's leading consumer and small business banks. At June 30, 2008, WaMu and its subsidiaries had assets of $309.7 billion. The company has a history dating back to 1889 and its subsidiary banks currently operate approximately 2,300 consumer and small business banking stores throughout the nation. (source: company press release or website)

Why We Like It:
WaMu has put itself up for auction as it seeks to avoid its own death spiral into oblivion under the weight of its bad mortgage debts. Currently there are reports that five major banks are actively looking over WaMu's books to consider a bid. Those banks are Citigroup (C), JP Morgan (JPM), Wells Fargo (WFC), HSBC (HBC) and a Spanish company Banco Santander SA (STD). With five companies looking over WM there is a decent chance that the company will indeed be sold. Nothing is guaranteed. Several companies looked at Lehman Brothers (LEH) and they all decided to walk away. There is a lot of speculation that WM could be sold in the next week or two. If the deal happens over this weekend and is announced before trading on Monday morning we would abort this play. You'll have to check the news headlines on Monday morning to make sure. We're listing October calls and January calls if you want more time.

Note: We're not listing a stop loss. This is an aggressive, speculate bet that WM gets bought out at a premium to its current share price. This stock has been too volatile to try and play with a stop. Any stop we did use would be so wide the options would be crushed by the time it was hit.

Suggested Options:
We're suggesting the October or January calls. Consider the $5.00 strikes if WM dips on Monday morning.

BUY CALL OCT 6.00 WM-JE open interest=15555 current ask $0.37
BUY CALL OCT 8.00 WM-JV open interest= 7063 current ask $0.25
BUY CALL OCT 10.00 WM-JB open interest= 6340 current ask $0.15

BUY CALL JAN 7.50 WM-AQ open interest=113014 current ask $0.45
BUY CALL JAN 10.00 WM-AB open interest=22447 current ask $0.31

Picked on September 21 at $ 4.25
Change since picked: + 0.00
Earnings Date 10/22/08 (unconfirmed)
Average Daily Volume = 113 million
 

New Puts

None today.
 

New Strangles

None today.
 

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