NEW DIRECTIONAL CALL PLAYS

Dril-Quip, Inc. - DRQ - close: 118.06 change: +1.25

Stop Loss: 114.75
Target(s): 124.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 5 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
DRQ is in the oil and gas equipment and services industry. They make offshore drilling equipment. The stock has been a very consistent performer since its last earnings report in early August where management raised their guidance. Shares have been resistant to profit taking during the market's recent slide from its September peak. Now, after a brief consolidation we are seeing DRQ hit new all-time highs. It probably helps that DRQ is constantly mentioned as a takeover target.

Today's high was $118.09. I am suggesting a trigger to buy calls at $118.25. If triggered we'll use a stop loss at $114.75. Our target is $124.50. However, we will most likely exit prior to DRQ's earnings report expected in early November. If you are willing to hold over the earnings announcement then you may want to use the December options instead of November options. I am suggesting small positions because the spread on DRQ's November options are a bit wide.

Trigger @ $118.25 *small positions*

- Suggested Positions -

buy the NOV $120 call (DRQ1316k120) current ask $2.70

- or -

buy the DEC $125 call (DRQ1322L125) current ask $2.15

Annotated Chart:

Entry on October -- at $---.--
Average Daily Volume = 281 thousand
Listed on October 14, 2013


iShares Russell 2000 ETF - IWM - close: 108.22 change: +0.54

Stop Loss: 104.80
Target(s): 114.00
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Government shutdown? What shutdown? Debt ceiling worries? Where? Investor expectation for a deal to get done in Washington has lifted the small cap Russell 2000 index (and ETF) to new all-time highs. It is above the post-FOMC meeting peak and breaking through resistance near the $108 level.

A deal in Washington will get done eventually and that could turn on the "all clear signal" for market participants to jump back in with both feet. Today's high was $108.35. I am suggesting a trigger to buy calls at $108.55. If triggered our target is $114.00. We'll start with a stop loss at $104.80, just below last Thursday's low.

Trigger @ $108.55

- Suggested Positions -

buy the 2014 Jan $110 call (IWM1418a110) current ask $2.88

Annotated Chart:

Entry on October -- at $---.--
Average Daily Volume = 41 million
Listed on October 14, 2013