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New Plays

REITs are rolling over

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NEW DIRECTIONAL PUT PLAYS

Avalonbay - AVB - close: 57.98 change: -1.68 stop: 62.55

Why We Like It:
The REIT stocks are rolling over again. The bounce in AVB last week stalled at its 50% retracement from the December high. Momentum indicators have turned bearish again. AVB is back under round-number support at $60.00. This looks like another entry point to buy puts. Friday's high was $62.50 so we'll use a stop loss at $62.55. Our first target is $51.00. We'll set a second target at $46.00. More aggressive traders could aim for the November lows. FYI: The P&F chart is bearish with a $41 target. Plus, traders should note that AVB has a high amount of short interest at more than 18% of the float. That makes it a candidate for a short squeeze.

Note: We're also adding BXP as a bearish play. Try not to over exposure yourself to anyone sector.

Suggested Options:
January options have all the open interest but they expire soon. We'd rather play February puts. Note there are multiple root symbols for AVB.

BUY PUT FEB 60.00 AZB-NL open interest= 10 current ask $7.00
BUY PUT FEB 55.00 AVB-NK open interest=130 current ask $5.30
BUY PUT FEB 50.00 AVB-NJ open interest=  2 current ask $3.40

Annotated Chart:
AVB

Picked on January 05 at $ 57.98
Change since picked:     + 0.00
Earnings Date          02/04/09 (unconfirmed)
Average Daily Volume =      2.6 million  


Boston Properties - BXP - close: 52.60 change: -2.53 stop: 57.01

Why We Like It:
BXP is another REIT stock that has seen its bounce reverse under resistance at its 50-dma and near a short-term Fibonacci retracement level. These stocks are somewhat volatile so we have a wide stop loss. More conservative traders may want to use a tighter stop (maybe just above $55.00). Our first target on BXP is $47.75. Our second target is $42.75. FYI: BXP also has above average short interest, which puts it at risk for a short squeeze. Plus, readers should consider this a higher-risk play because the spreads on the options are wide!

Suggested Options:
We are suggesting the February puts but plan to exit ahead of the January earnings report later in the month. Traders may want to use Aprils, which appear to have more open interest.

BUY PUT FEB 55.00 BXP-NU open interest= 20 current ask $9.10
BUY PUT FEB 50.00 BXP-NW open interest=  0 current ask $6.70
BUY PUT FEB 45.00 BXP-NV open interest=  0 current ask $4.70

Annotated Chart:
BXP

Picked on January 05 at $ 52.60
Change since picked:     + 0.00
Earnings Date          01/27/09 (unconfirmed)
Average Daily Volume =      3.3 million  


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