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Call Updates

Intel Corp. - INTC - close: 25.13 chg: -0.11 stop: 23.45

The semiconductor sector was the technology laggard on Friday closing fractionally in the red. Shares of INTC followed suit after failing to breakout over its simple 100-dma near $25.50. The stock looks short-term overbought and due for a dip. The simple 200-dma near $25 would normally act as short-term support but we suspect the dip will pull INTC toward the $24.50 region or even toward the $24.20 region near its simple 10 and 50-dma's. Readers can watch for the dip but we'd wait for a bounce before considering new entries. Our year-end target is the $26.00-26.50 range.

Suggested Options:
We are not suggesting new positions at this time. If a new entry presents itself we'd choose the January calls.

Picked on November 06 at $ 23.99
Change since picked: + 1.14
Earnings Date 10/18/05 (confirmed)
Average Daily Volume = 51.6 million

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Legg Mason - LM - cls: 116.16 change: +0.16 stop: 108.75

The broker-dealer sector continues to be a pocket of real strength in the markets. The XBD index hit another new all-time high on Friday. Unfortunately, LM seemed to lag behind most of its peers but the trend remains bullish. The stock is up significantly already from our picked price and we're not suggesting new plays. More conservative traders may want to think about taking some money off the table or consider exiting near $118, which is currently overhead resistance! Our target is the $119-120 range.

Suggested Options:
We are not suggesting new call positions at this time.

Picked on November 02 at $111.69
Change since picked: + 4.47
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 904 thousand

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Rockwell Autom. - ROK - cls: 56.31 chg: +0.11 stop: 53.49

ROK's lack of follow through with the market's rally over the past two days does not bode very well for the bulls. The good news is that the stock has been consolidating sideways over support at the $55.00 level. The overall pattern would suggest the next move should be upward but obviously there is no guarantee here. The P&F chart, which cuts out a lot of the daily noise, looks very bullish with a triple-top breakout buy signal pointing to a $69 target. We are only targeting a move into the $61-62 range. We remain bullish but traders should consider new positions very carefully. More conservative traders might want to tighten their stop loss.

Suggested Options:
We are suggesting the January calls because they have more open interest than Decembers.

BUY CALL JAN 55.00 ROK-AK open interest=948 current ask $3.60
BUY CALL JAN 60.00 ROK-AL open interest=278 current ask $1.25

Picked on November 03 at $ 55.90
Change since picked: + 0.41
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 804 thousand
 

Put Updates

None
 

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

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AmerisourceBergen - ABC - cls: 76.98 chg: +0.03 stop: n/a

We are very surprised by ABC's lack of movement. The market has been rising yet shares of ABC have consolidated in a very tight range, which is the worst possible scenario for our strangle position. There are only five trading days left before November options expire. If you're holding a November strangle it's time to think about damage control. Our estimated cost on the November strangle was about $2.10. The options in our November strangle were the $80 calls (ABC-KP) and the $70 puts (ABC-WN). The puts are virtually worthless now (0.00bid/$0.10ask) so we would not sell those to avoid paying a commission. Traders should give serious consideration to selling the Nov. $80 calls, which are currently at $1.10bid/$1.25 ask. That would redeem half our investment. We do give up the chance should ABC make a run higher next week but we're faced with time erosion that will pick up steam very quickly this week! If you are holding the December strangle, which had an estimated cost of $2.80 using the December $80 calls (ABC-LP) and the December $80 puts (ABC-XN), we would continue to target a rise to $5.00 or more.

Suggested Options:
We are not suggesting new strangle positions in ABC.

Picked on October 16 at $ 74.81
Change since picked: + 2.17
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 900 thousand

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Genentech - DNA - close: 94.74 chg: -0.14 stop: n/a

DNA is still struggling under resistance at the $95.00 level. While the trend looks bullish DNA may depend on the BTK biotech index to lead the next move. Currently the BTK index has also risen to prior resistance. A move lower in the BTK will probably be a signal to take profits in DNA. If the BTK breaks out then DNA will likely follow. The estimated cost for our December strangle was about $2.40. The options were the December $95 calls (DWN-LS) and the December $75 puts (DWN-XO). Currently the Dec. $95 calls are trading at $3.50bid/$3.60ask. If you don't want to wait for the breakout or if you don't want to risk DNA turning lower and never returning to the $95 level more conservative traders may want to exit right here! There are five weeks left before December options expire so we're going to keep the play open and our target in the $4.50-5.00 range.

Suggested Options:
We are not suggesting new strangle positions in DNA.

Picked on October 20 at $ 84.83
Change since picked: + 9.91
Earnings Date 10/10/05 (confirmed)
Average Daily Volume = 3.9 million

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eBay Inc. - EBAY - close: 43.89 chg: +0.58 stop: n/a

EBAY continues to rally higher following last week's breakout over the top of its previous trading range at the $42.00 level. The move was good news for us because EBAY's sideways chopping action had pretty much doomed our November strangle. Currently our position is still underwater but at least now there is a chance it could turn around. We have five trading days left before November options expire. The biggest challenge now is that EBAY looks short-term overbought and is facing resistance again at the $45.00 mark and the time premium decay is going to speed up significantly this week. Our estimated cost was about $1.05. The November $35 puts (XBA-WG) are virtually worthless so we would not waste the commission trying to sell them - just let them expire. The November $45 calls (XBA-KI) are currently selling at $0.35bid/$0.40ask. It's up to you, the individual trader, to decide at what price do you try and salvage some capital from this play. We're going to lower our target to $0.65.

Suggested Options:
We are not suggesting new strangle positions in EBAY.

Picked on October 18 at $ 40.42
Change since picked: + 3.47
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 18.3 million

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Four Seasons - FS - close: 49.80 chg: -1.61 stop: n/a

Shares of FS continued to sink on Friday and lost 3.13% on above average volume to close under round-number support at the $50.00 mark. The company reported earnings on Thursday morning and missed estimates by 15 cents. On Friday morning the stock was downgraded. The options in our strangle were the January $60 calls (FS-AL) and the January $50 puts (FS-MJ). Our estimated cost was about $2.60. We're aiming for a rise to $5.00 or more. The move under $50 is good news because the puts should now have a bigger delta and see a closer 1-for-1 move as the stock declines.

Suggested Options:
We are not suggesting new strangle positions in FS.

Picked on November 08 at $ 55.37
Change since picked: - 5.57
Earnings Date 11/10/05 (confirmed)
Average Daily Volume = 319 thousand

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General Dynamics - GD - cls: 116.35 chg: -1.15 stop: n/a

We're running out of time with GD. There are five days left before the November options expire. The stock spent way too much time churning sideways. The potential good news is that the recent rally attempt appears to have failed and its technical oscillators are pointing lower. We just need to see a breakdown under support at the 100-dma near the $115.00 level. The options in our strangle are the November $125 calls (GD-KE) and the November $115 puts (GD-WC). Our estimated cost was about $2.00. Currently the Nov. 115 puts are trading at $0.40bid/$0.50ask. A move to the $115 level will certainly help but time decay is going to speed up this week. We're going to leave our target to exit at $2.00 for now but more conservative traders may want to aim for $1.00 or $1.50 as a chance to redeem some capital.

Suggested Options:
We are not suggesting new strangle positions in GD.

Picked on October 09 at $119.59
Change since picked: - 3.24
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 713 thousand

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Harman Intl - HAR - cls: 102.54 chg: -1.65 stop: n/a

One of the many goals of a disciplined trader is to keep their emotions out of the picture. Yet that can be hard when a stock, like HAR, just seems to taunt us. Shares have continued to oscillate on either side of the $100 level following its earnings report, which was the worst possible scenario for our strangle position. The options in our strangle were the November $110 calls (HAR-KB) and the November $90 puts (HAR-WR). Currently both have eroded significantly and unless HAR makes a big move one direction this week we're faced with a big loss here. Traders should try to salvage what they can if HAR makes any attempt at a breakout either direction.

Suggested Options:
We are not suggesting new strangle positions in HAR.

Picked on October 18 at $100.80
Change since picked: + 1.75
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 739 thousand

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Hutchinson Tech. - HTCH - cls: 25.34 chg: -0.49 stop: n/a

Shares of HTCH have not responded to its earnings report as we might have expected. What we do not want is to see the stock continue to churn sideways and kill our already damaged strangle position. Fortunately, we did pick January options so there is plenty of time left for HTCH to make a move. The options in our strangle were the January $30 calls (UTQ-AF) and the January $20 puts (UTQ-MD). Our estimated cost was $1.65. We are adjusting our target from $3.00 to breakeven at $1.65.

Suggested Options:
We are not suggesting new strangle positions in HTCH.

Picked on October 26 at $ 24.89
Change since picked: + 0.45
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 666 thousand

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Inamed Corp. - IMDC - close: 74.73 change: -0.54 stop: n/a

We are in a wait-and-see mode with IMDC. The stock broke out to the upside following its earnings report. Yet lately that rally has stalled. We're expecting shares to pull back into the $72-74 range before moving higher if it moves higher. We have five weeks left before the December options expire. The options in our strangle are the December $75 calls (UZI-LO) and the December $65 puts (UZI-XM)). Our target is for a rise to $5.00 or more.

Suggested Options:
We are not suggesting new strangle positions in IMDC.

Picked on October 30 at $ 70.63
Change since picked: + 4.08
Earnings Date 11/01/05 (unconfirmed)
Average Daily Volume = 533 thousand

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Kos Pharma - KOSP - close: 58.92 chg: +0.33 stop: n/a

Following KOSP's earnings report the stock produced a failed rally at its simple 50-dma overhead and then hit new relative lows. We expected a bounce from the 200-dma and it looks like that bounce could fade under the $60 level. The estimated cost for our strangle was $2.90. We have five days left before the November options expire so we are adjusting our target to $2.25. The options are the November $65 call (KQW-KM) and the November $55 put (KQW-WK).

Suggested Options:
We are not suggesting new strangle positions in KOSP.

Picked on October 20 at $ 59.80
Change since picked: - 0.88
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 460 thousand

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Lear Corp - LEA - close: 28.33 chg: +0.55 stop: n/a

Dow-component GM produced a nice bounce on Friday and it rubbed off on shares of LEA, which added 1.9%. Unfortunately for shareholders the bounce just looks like a temporary reprieve. The options in our strangle are the January $35 calls (LEA-AG) and the January $25 puts (LEA-ME). We are targeting a rise to $3.20 or more.

Suggested Options:
We are not suggesting new strangle positions in LEA.

Picked on November 06 at $ 30.24
Change since picked: - 1.91
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 1.8 million

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Lowes Cos. - LOW - close: 61.97 chg: +0.97 stop: n/a

LOW has continued to bounce from the $60.00 level and the rally stalled on Friday afternoon near short-term resistance at the $62 mark. The company is due to report earnings on the morning of Monday, November 14th. Wall Street estimates are at $0.77 per share. We are no longer suggesting new strangle positions in the stock with it outside our entry window of $60.50-59.50. The options in our suggested strangle were the December $65 calls (LOW-LM) and the December $55 puts (LOW-XK). We are aiming for a rise to $2.40 or higher on the strangle. Our time frame is five weeks.

Suggested Options:
We are not suggesting new strangles in LOW.

Picked on November 09 at $ 60.33
Change since picked: + 1.64
Earnings Date 11/14/05 (confirmed)
Average Daily Volume = 4.3 million

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Loews - LTR - close: 96.36 change: -0.05 close: n/a

LTR closed near all-time highs but the rally is starting to look tired. Shares might dip back toward the $94 level before continuing higher. We're not suggesting new strangle positions in LTR. The options in our strategy are the December $95 calls (LTR-LS) and the December $85 puts (LTR-XQ). Our estimated cost is about $3.05. We'll plan to exit if either option rises to $5.00 or more.

Suggested Options:
We are not suggesting new strangles in LTR.

Picked on October 23 at $ 89.94
Change since picked: + 6.42
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 602 thousand

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Microsoft - MSFT - close: 27.28 change: +0.19 stop: n/a

Software titan MSFT continues to climb despite being very, short-term overbought. The stock is nearing what looks like resistance at the $27.50 level so next week could see some profit taking. Our strangle is based on the December $27.50 call (MSQ-LY) and the December $22.50 put (MSQ-XX). Our estimated cost was $0.30 for the entire position. We are aiming for a rise to $0.80-0.90 for either side of the strangle. Currently the December $27.50 calls are already trading at $0.45bid/$0.50ask, which is a 50% rise in value for our position. More conservative traders may want to exit early right here.

Suggested Options:
We are not suggesting new strangles for MSFT.

Picked on October 25 at $ 25.03
Change since picked: + 2.25
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 64 million

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O'Reilly Auto. - ORLY - close: 30.89 chg: +0.13 stop: n/a

This is a crucial week for ORLY. The stock has shown great strength the last couple of weeks and bulls have been buying dips near the $30.00 level. Unfortunately, we only have five days left before November options expire. Our cost for the strangle was about $0.75. Currently the November $30 calls (OQR-KF) are trading at $0.85/0.95. Our current target is $1.25. Traders have to decide - do you exit here and protect your capital with a small gain or risk a pull back by trying to go for more money. It would not take much for ORLY to push the calls to our target but shares do look overbought.

Suggested Options:
We are not suggesting new strangles on ORLY.

Picked on October 09 at $ 28.23
Change since picked: + 2.68
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 513 thousand

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Verifone Holdings - PAY - cls: 24.46 chg: +0.06 stop: n/a

PAY experienced some profit taking on Friday morning with a decline to $23.50 but bulls were quick to buy the dip. We wouldn't be surprised to see more profit taking and traders can watch the $22.50 level to act as stronger support. We are targeting a rise to $4.50 for our January strangle. Currently the January $22.50 calls (PAY-AX) appear to be the winning side.

Suggested Options:
We are not suggesting new strangles for PAY.

Picked on October 12 at $ 19.98
Change since picked: + 4.48
Earnings Date 11/18/05 (unconfirmed)
Average Daily Volume = 259 thousand

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Protein Design Labs - PDLI - cls: 25.56 chg: -0.14 stop: n/a

PDLI continues to display relative weakness and is struggling under short-term resistance at the $26.00 level. We would not be surprised to see PDLI bounce back toward the $26.75-27.00 range before continuing lower again. The options in our hypothetical strangle are the December $30 calls (PQI-LF) and the December $25 puts (PQI-XE). We'll plan to sell if either side rises to $3.25. We have five weeks left before December options expire.

Suggested Options:
We are not suggesting new strangles in PDLI.

Picked on October 30 at $ 27.70
Change since picked: - 2.14
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 1.8 million

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Spectrum Brands - SPC - close: 18.00 change: -0.00 stop: n/a

Investors were not happy with SPC's earnings report and guidance on Thursday and the stock gapped down sharply. We see the lack of an oversold bounce on Friday as a good sign that there is more weakness ahead. Our estimated cost for this strangle was $1.25. The options in our suggested strangle are the December $22.50 calls (SPC-LX) and the December $17.50 puts (SPC-XW). We are aiming for a rise to $2.50 or more.

Suggested Options:
We are not suggesting new strangle positions for SPC.

Picked on November 08 at $ 20.63
Change since picked: - 2.63
Earnings Date 11/10/05 (confirmed)
Average Daily Volume = 576 thousand
 

Dropped Calls

Sears Holding - SHLD - cls: 114.80 chg: -3.48 stop: 121.99

SHLD has completed ignored the strength in the retail sector and fallen sharply from the top to the bottom of its trading range. This relative weakness suggest that the next move in the stock is going to be down. We're going to switch sides from a bullish breakout play to a bearish breakdown play. Look for the new play details under new puts in this newsletter. This call play was never opened since SHLD never hit our trigger.

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 12/07/05 (unconfirmed)
Average Daily Volume = 3.2 million
 

Dropped Puts

Career Educ. - CECO - cls: 35.57 chg: -0.38 stop: 35.01

Our Thursday update for CECO said that if the stock traded over $36.00 on Friday we would drop the play. Well shares did hit $36.02 but the rally, if you want to call it that, quickly failed near the 200-dma and 50-dma, which are converging together near the $36.00 level. Friday's session looks like a failed rally and more importantly it looks like a new bearish entry point. While we are going to drop CECO as a bearish candidate (unopened) our readers may want to keep an eye on the stock for further weakness. The $33.00 level is short-term support.

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/02/05 (confirmed)
Average Daily Volume = 1.3 million
 

Dropped Strangles

None
 

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