Option Investor
New Plays

Are you a believer in the rally?

HAVING TROUBLE PRINTING?
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Play Editor's Note:

If you are a believer that this rally still has legs then looking to buy the dip is your strategy. If you think that the rally has run out of steam and it is back toward the 2009 lows then today might be your entry point for bearish positions. I'm going to mention both perspectives in tonight's new plays.

FYI: If you're looking for a bearish candidate I would check out ISRG. I think the stock looks poised to drop toward $90 and probably $85 again.


NEW DIRECTIONAL CALL PLAYS

Goldman Sachs - GS - close: 111.11 change: -0.82 stop: 94.45

Why We Like It:
It's been a rocky relationship but GS is still the darling of Wall Street. Shares have soared toward resistance near its 200-dma and one of its trendlines of lower highs. This is a good spot to expect a correction but we want to be ready to buy the dip. Broken resistance near $100 should offer new support.

I am suggesting readers buy calls on a dip into the $101.00-100.00 zone but considering our stop loss at $94.45 you could make that entry point area wider from $101 to $95. If triggered at $101 our first target is $114.50. I'm setting an aggressive second target at $129.00.

If you are less optimistic and think financials will retest their lows then today looks like a bearish entry point for you. Consider put positions now with a stop loss above today's high. Your first target could be $100 with a secondary target in the $90-80 zone. This is just an alternative strategy and not an official newsletter trade.

Suggested Options:
I am suggesting the April calls although you might want to consider May calls. It is always up to the individual trader to decide which month and which strike price best suits your trading style and risk profile.

BUY CALL APR 120 GS-DD open interest=15851 current ask $4.60
BUY CALL APR 110 GS-DB open interest=11244 current ask $9.15
BUY CALL APR 100 GS-DT open interest=15633 current ask $15.50

Annotated Chart:
GS

Picked on    March xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           04/15/09 (unconfirmed)
Average Daily Volume =        30 million  
Listed on March 24, 2009         


S&P 500 SPDR - SPY - close: 80.60 change: -1.62 stop: 74.90

Why We Like It:
We think investors are still in buy the dip mode with a little help from the end of quarter window dressing. It looks like the S&P 500 should have some support near $780 (78.00 on the SPY). I'm suggesting readers buy calls on a dip to $78.25. We'll use a stop loss at $74.90.

If triggered at $78.25 our first target is $82.25. Our second target is 87.00.

Not an official trade but if you're bearish then today is your entry point with a stop loss above today's high. I would aim for the $76.00-75.00 zone as your first target. A more aggressive target would be the $71-70 region.

Suggested Options:
I am suggesting the April calls.

BUY CALL APR 76.00 SZC-EX open interest=16659 current ask $7.85
BUY CALL APR 80.00 SZC-EB open interest=19282 current ask $5.30
BUY CALL APR 84.00 SZC-EF open interest=24159 current ask $3.30

Annotated Chart:
SPY

Picked on    March xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =       416 million  
Listed on March 24, 2009         


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