If the market correction continues this stock could fill the gap.
NEW DIRECTIONAL PUT PLAYS
F5 Networks - FFIV - close: 115.95 change: -3.60
Stop Loss: 121.10
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes
F5 Networks is the global leader in Application Delivery Networking (ADN), focused on ensuring the secure, reliable, and fast delivery of applications. F5â€™s flexible architectural framework enables community-driven innovation that helps organizations enhance IT agility and dynamically deliver services that generate true business value. F5â€™s vision of unified application and data delivery offers customers an unprecedented level of choice in how they deploy ADN solutions. It redefines the management of application, server, storage, and network resources, streamlining application delivery and reducing costs. Global enterprise organizations, service and cloud providers, and Web 2.0 content providers trust F5 to keep their business moving forward. (source: company press release or website)
Why We Like It:
Longer-term I'm bullish on FFIV but shares appear to have risen too far too fast. The rally has run out of gas in the $125-126 zone and now shares are seeing a correction. If the market continues to decline FFIV could underperform (a.k.a. sink faster than the market) as traders rush to lock in profits. Right now FFIV is hovering above very short-term support near $115.00. If this level breaks FFIV could easily "fill the gap" from late October. I am suggesting a trigger to buy put options at $114.50 and we'll target a drop to $105.25. Keep in mind this is a very aggressive, higher-risk trade. We want to use small positions to limit our risk.
Trigger @ $114.50
Suggested Position: Buy the 2010 December $105 puts (FFIV1018X105) current ask $2.70
Entry on November xxth at $ xx.xx
Earnings Date 01/19/11
Average Daily Volume = 2.9 million
Listed on November 16th, 2010