ASTE - Astec Industries $18.18
Astec Industries (NASDAQ:ASTE) designs, engineers, manufactures and markets equipment and components used primarily in road building and related construction activities. The company's products are used in each phase of road building, from quarrying and crushing the aggregate to testing the mix for application of the road surface. Astec also manufactures certain equipment and components unrelated to road construction, including trenching, auger boring, directional drilling, environmental remediation and industrial heat transfer equipment. Its products are marketed both in the United States and internationally. In addition to equipment sales, Astec manufactures and sells replacement parts for equipment in each of its product lines.
Shares of ASTE rallied Friday in conjunction with the broader market sectors, moving up (and possibly out of) a recent trading range near $17. However, the apparently "bullish" chart pattern may not be telling the whole story as there is a possibility of downside activity when the company reports quarterly earnings later this month. The severe sell-off in OCT-04 provides a good example of the potential volatility in the issue and also explains the larger than normal premiums in its options. At the same time, a brief review of the company's primary competitors; Ingersoll-Rand (NYSE:IR) and Caterpillar (NYSE:CAT), suggests that "life is good" in the Diversified Machinery segment. Overall, we believe the outlook for ASTE's share value is relatively favorable and traders who agree with that assessment should consider this position.
Sell Put MAR 15.00 QYA-OC
Current Bid = $0.35 Open Interest = 23
Potential Profit (5 contracts) = $175
Initial Margin (5 contracts) = $2,220
Return on Investment (max) = 5.8%
Cost Basis in Stock = $14.65
Days to Expiration = 41