Though the market overall is looking up, tech is taking a beating. I’m seeing plenty of opportunities for inexpensive put options in this sector downtrend. But in this bullish market, prices overall are trending up, meaning calls are a safer bet.
In the large-cap computer area, bellwether IBM (NYSE:IBM) showed the overall bearish trend for the sector when it reported last week. With yet another revenue miss and an unchanged EPS estimate, this giant is showing weakness, as are its peers.
Oracle (NASDAQ:ORCL) was in an upward trend but is currently pulling back. Similarly, Honeywell (NYSE:HON) was also trending up, but now it’s fairly quiet, staying in the $61 to $62 range for the past two weeks. Not much opportunity there for playing options.
Even Apple (NASDAQ:AAPL) is a problem stock right now. It’s in a downward trend, and my Power Options system shows that it may accelerate. I have Google (NASDAQ:GOOG) on my “sell watch” as well — it has started going down, and although it may have potential as a long-term trade, it’s certainly feeling the pinch right now. Its recent earnings report snafu didn’t help.
With tech giants stumbling technically, I’m looking to pockets of strength in smaller names. One such company is Take-Two Interactive Software (NASDAQ:TTWO), a company that develops, markets and publishes video games, including the popular Grand Theft Auto series. My system rates it as a reestablished buy after it was in a lukewarm upward trend. This kind of bounceback is one of the most reliable buy signals.
Options Recommendation: Buy TTWO Dec 12 Call options at 75 cents or lower, when the stock price should be about $11.40. After entry, take profits if the stock price hits $12.80. Options should rise to about $1.50. Exit if the stock price closes below $10.70, or the option price drops to 50 cents.
Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.