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Play Editor's Note:

Here's the plan. Stocks are rising on bad news. Everyone is expecting a terrible jobs report tomorrow. As long as the jobs report shows a loss that isn't unfathomable then stocks might go up anyway with this current "buy the bad news" mentality.

I am listing a few bullish plays and most of them (not BAC) have triggers. The idea is that if the market rallies in spite of the jobs report then we'll be triggered and the plays will be opened. If the jobs report is bad and investors sell the news then our triggers should not be hit and the plays will not open. Traders will want to stay on top of their positions tomorrow since the session might see a lot of volatility and there is always the possibility of an intraday reversal. I have provided stop losses but if we get triggered and shares start to see a significant pull back I would seriously consider an early exit well before we get stopped out.


NEW DIRECTIONAL CALL PLAYS

Bank of America - BAC - close: 5.14 change: +0.44 stop: 3.75

Why We Like It:
I'm not going to go into a lot of details about BAC. It's a major bank that is constantly in the news and many are worried that the bank will be nationalized and the equity (stockholders) will be wiped out. At $5.00 a share you could buy BAC as a long-term bullish call option with no expiration. Yet given the downtrend, why buy it now when you might be able to buy it for half ($2.50) in a few days. Well one reason is the massive volume today. BAC fell to $3.77 and then rebounded to a 9% gain on volume of 757 million shares. That's just an incredible amount of volume and sometimes abnormal volume spikes on an intraday bounce might signify a bottom.

However, I do not want to give you the impression that this is a normal call play. We are not buying calls on BAC. Instead we want to sell calls on BAC. This is going to be a covered call play. The plan is to buy the stock now and sell calls against the position. For every 100 shares of BAC you buy you can sell one call option.

I am suggesting that readers sell the March $6.00 calls (BYO-CF) that are currently trading $1.06bid/$1.09ask. If we get called out we'll make almost 20% on the gain in the stock price and almost 20% on the sale of the call. At the same time we have some downside protection. If we sell the call ($1.06) our position doesn't lose money until BAC trades under $4.08. Of course that could happen tomorrow morning. This is still a very volatile stock.

Now tomorrow is the January jobs report and this will influence how stocks trade tomorrow. If BAC gaps higher than we might want to adjust the call strike we sell, maybe we sell the $7.00s. If BAC gaps open lower then maybe we'll want to sell the $5.00s. Assuming for the moment that BAC opens within 25 cents of where it is now I would go ahead and sell the March $6.00 strikes.

We still want to use a stop loss on this play. If BAC hits a new low (under $3.77) we want to get out. So our stop loss will be $3.75. That means we have to buy back the calls we sold because we don't want to be naked any calls and then we sell the stock. Some trading platforms will allow you to program all of that into one trade... so that if BAC hits $3.75 it will buy back the calls and then sell the stock closing the entire position.

Suggested Options:
Buy shares of BAC and sell calls against it. I'm suggesting the March $6.00 calls but we'll have to adjust based on where the stock opens tomorrow.

SELL CALL MAR 6.00 BYO-CF open interest=16210 current ask $1.09

Annotated Chart:
BAC

Picked on February 05 at $  5.14
Change since picked:      + 0.00
Earnings Date           04/21/09 (unconfirmed)
Average Daily Volume =       301 million  


Nucor - NUE - close: 44.25 change: +1.50 stop: 42.95

Why We Like It:
The trend in NUE is starting to look bullish. The stock has rallied toward resistance at its trendline of lower highs and the $45.00 mark. I am suggesting that readers buy calls if NUE trades at $45.25 or higher. However, we do not want to open positions if NUE gaps open above $46.00. Our short-term target is $49.75.

Suggested Options:
We are suggesting the March calls. Trigger 45.25.

BUY CALL MAR 45.00 NUE-CI open interest=1026 current ask $3.60
BUY CALL MAR 47.50 NUE-CW open interest=1005 current ask $2.45
BUY CALL MAR 50.00 NUE-CJ open interest=2324 current ask $1.65

Annotated Chart:
NUE

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           04/16/09 (unconfirmed)
Average Daily Volume =       7.8 million  


Transocean - RIG - close: 57.85 change: +2.60 stop: 54.45

Why We Like It:
RIG, a major oil service company, saw its stock breakout over resistance near $58.00 today. This move produced a new triple-top breakout buy signal on the Point & Figure chart. The P&F chart was already bullish and is forecasting a $78 target.

I would actually buy calls on RIG right here but I'm worried about the jobs report tomorrow. Thus I want to see a new relative high. I'm suggesting readers use a trigger at $58.55 to buy calls. If triggered our first target is $64.50. We'll set a secondary target at $68.50. Keep in mind that we don't want to hold over the February 17th earnings report.

Suggested Options:
I am suggesting the March calls.

BUY CALL MAR 55.00 RKJ-CK open interest=5434 current ask $6.40
BUY CALL MAR 60.00 RKJ-CL open interest=2503 current ask $3.80
BUY CALL MAR 65.00 RKJ-CM open interest=2155 current ask $1.95

Annotated Chart:
RIG

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           02/17/09 (confirmed)
Average Daily Volume =       7.8 million  


Shaw Group - SGR - close: 29.28 change: +1.26 stop: 27.25

Why We Like It:
While the stimulus package is still being debated and crafted many believe that construction companies like SGR will eventually be a beneficiary of the plan. The stock has developed a very bullish pattern of higher lows as it coils for a breakout over resistance at $30.00.

I am suggesting readers use a trigger at $30.25 to buy calls. If triggered we have two targets. Our first target is $34.00. Our second target is $36.75 but we may have to adjust it so we stay under the simple 200-dma.

Suggested Options:
I am suggesting the March calls.

BUY CALL MAR 30.00 SGR-CF open interest= 737 current ask $3.00
BUY CALL MAR 35.00 SGR-CG open interest= 356 current ask $1.25

Annotated Chart:
SGR

Picked on February xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           04/09/09 (unconfirmed)
Average Daily Volume =       4.3 million  


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