Are Your Investments Going to Fail You This Year?
- Millions of Americans tuned in Sunday night to watch their
favorite stars walk the red carpet at the 82nd Annual Academy Awards.The low-budget Iraq war movie, “The Hurt Locker,” swept the show, garnering six Oscars, including the award for best director and best picture.
While it was an entertaining event, we’re more interested in stocks than pop culture, so we’ve compiled some
Oscar-themed option trades.Without further ado, here are the 10 nominees for the best option trades …
Are Your Investments Going to Fail You This Year?
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Disney (DIS)
By Chris Johnson and Jon Lewis
Let’s face it, Disney (DIS) still has the magic touch when it comes
to capturing moviegoers’ imaginations … and their dollars. Take Disney-owned Pixar’s hit “Up,” for example. The new wave of actor-less (at
least on the screen) animation films is here to stay, and the powerful combination of Disney and Pixar will continue to reign supreme in this genre.Aside from their movies, Disney continues to excel among the media names, as their recipe for turning small-screen stars into franchises has lifted
them through recessionary conditions. Regardless of where “Up” winds up on Oscar night, we like DIS as an intermediate-term bullish play. And we’re not the only ones. The stock was just upgraded by a Bank of America Merrill Lynch analyst.You can take your portfolio value “Up” by leveraging Disney’s move above the $35 level by purchasing the DIS July 31 Calls (DQD 100717C00031000) for
$2.25 or less.
Are Your Investments Going to Fail You This Year?
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The New York Times Company (NYT)
By Michael Shulman
One of the biggest snubs in the history of the Academy Awards was “Citizen Kane” losing the 1941 Oscar for Best Picture. The No. 1 movie of all
time, according to the American Film Institute (AFI), was nominated in nine categories, but only took home Best Original Screenplay. This snub is
said to be the result of a smear campaign run by American newspaper magnate William Randolph Hearst, on whose life the film was based.The film itself is a scathing indictment of the interaction of personal gain, greed and media owners. While we may never see an end to that, we
are witnessing the death of the newspaper thanks to the Web. And try as they may to adapt, big newspaper companies are not likely to get the happy
ending they’re hoping for.Take a look at put options on The New York Times Company (NYT).
Are Your Investments Going to Fail You This Year?
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Immucor Inc. (BLUD)
By Andrew Houghton and Nick Atkeson
We believe the Oscars are too limited in their scope. They fail to recognize an important art form, the horror movie genre. Our vote for the Best
Horror Movie of 2009 is “Blood: The Last Vampire.” In the movie, Saya, a half-human, half-vampire samurai preys on those who feast on human blood.
We enjoyed the movie, but with all of the blood-letting and sucking going on, the vampires could have used the services of Immucor Inc. (BLUD).Immucor is focused on serving the blood bank market. It makes blood analysis machines to identify blood properties prior to transfusion, and it
makes a variety of reagents that also serve to determine the nature of the blood.Since late August 2009, the stock has been trading essentially sideways with a slight upward bias. The total call open interest is about 3,000 contracts,
and total put open interest is about 1,000 contracts. What is attracting our attention is that almost all of the open call interest has been opened
since Jan. 15. On Jan. 15, institutional option investors purchased more than 1,000 BLUD June 20 Calls (QMQ 100619C00020000)
for $1.90. On March 1, they returned to buy almost another 1,000 BLUD June 22.5 Calls (QMQ 100619C00022500).It appears that savvy investors not only smell BLUD, but potentially taste huge option profits. We think you should follow in their footsteps.
Are Your Investments Going to Fail You This Year?
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Boeing (BA)
By Sam Collins
The biggest box office hit this year is James Cameron’s epic “Avatar,” which is set on the mythical planet of Pandora. And who but Boeing (BA)
would have a part in building a future space capsule capable of journeys to the far reaches of the universe?Technically speaking, Boeing bottomed below $30 in March 2009, and since July 2009 has been hugging its 50-day moving
average. BA recently made a new high at just under $65 and is now at $67 following an analyst upgrade. S&P rates BA a “four-star buy” with a price objective of $72.Buy the BA May 65 Calls (BZD 100522C00065000) for
$4.50 or less.
Are Your Investments Going to Fail You This Year?
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Alaska Air Group (ALK)
By Chris Johnson and Jon Lewis
“Up in the Air” is a Best Picture nominee starring George Clooney as a corporate downsizer who’s constantly flying across the country. It also describes
the airline sector, which has been on a tear of late. With GDP on the rise, oil prices steadying, and demand picking up, airlines have rallied.Alaska Air Group (ALK), parent of Alaska Airlines and Horizon Air,
has posted profits for six straight years, including a 1,900% increase in 2009. Lower fuel costs and a reallocation of aircrafts to new markets that
increased load factors helped the bottom line, and ALK is well-positioned in 2010. In fact, the company was just initiated as a “buy” by an analyst
based on higher demand and improved pricing power.With the stock flirting with three-year highs, look for a breakout to the highs of late 2006. That represents a move of 20%-25% from current levels.
Based on that move, the ALK July 40 Calls (ALK 100717C00040000) are
the right play under $2.50.
Are Your Investments Going to Fail You This Year?
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CurrencyShares Euro Trust (FXE)
By Michael Shulman
Compared to some of the other categories, not many people get too excited about which movie will win Best Foreign Language Film. Blame it on Americans’
ethnocentricity, or perhaps on our short attention spans and distaste for subtitles.But while many Americans may not have an interest in foreign films, investors seem all too excited about foreign stock markets. And this has created
numerous bubbles just waiting to burst.Take Europe, for example, which is stagnant and slipping back into a recession. Many European countries have way too much debt, their currencies
and bonds are fragile, and, as we saw with Greece, their markets are one crisis away from taking a savage hit. So, my nominee here is to short the
euro via put options on the CurrencyShares Euro Trust (FXE).
Are Your Investments Going to Fail You This Year?
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Hartford Financial Services Group Inc. (HIG)
By Andrew Houghton and Nick Atkeson
Only one movie can take home the coveted Best Picture award, and most movie critics believe the award will go to “Avatar” or “The Hurt Locker.” These
films are well-known and generally likeable; in some sense, there is very little upside for these two movies. Most regular moviegoers have seen both
films, and people expect one of them to win.Of the eight other films that have also been nominated, the one that is in the biggest win/win situation is “A Serious Man.” No one thinks this
film has chance of winning. Translation: There is no downside. And when people hear that a film they’ve never even heard of was considered good enough
to be nominated, they will go out and watch it.“A Serious Man” is somewhat like Hartford Financial Services Group Inc. (HIG).
This stock is completely out of favor — almost an unknown. HIG is trading at about six times its $4 earnings estimate. The company’s book value is
$46.64, and yet the stock is trading around $26, or about 0.6 times book value.The slightest whiff of good news or increased market notice could send HIG substantially higher. Recently, there was a rumor that Allianz (AZ)
may acquire the company, and we saw positive options flow. This could be the beginning of a broader recognition that this solid company is currently
completely under-appreciated, so considering purchasing some HIG call options.
Are Your Investments Going to Fail You This Year?
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Disney (DIS)
One of this year’s nominees for Best Picture is Pixar’s latest box office hit “Up,” a universally acclaimed hit that has everyone smiling as they
leave the theater. Pixar is a division of Disney (DIS), so why not
cash in on this latest Oscar nominee by purchasing call options on the stock.Now at $33, DIS is in a bull market that began in March 2009 at about $15, and is now challenging its all-time high at $35. S&P rates
the stock a “four-start buy” with a price objective of $35.Buy the DIS July 33 Calls (DQD 100717C00033000) for $1.80 or less. This should give the stock lots of time to attack its high at $35, which might provide a double. And if the stock breaks to new highs, the reward for these call holders will be even greater than that.
Are Your Investments Going to Fail You This Year?
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SPDR S&P Homebuilders (XHB)
By Michael Shulman
One movie review described Best Picture nominee “Up in the Air” as an “ode to recession-hit US.” Leading man George Clooney is paid to travel around
the country and lay off other companies’ workers, and business is quite lucrative given the tough economic times.And, as much as Wall Street would like you to believe we are out of the woods, we’re not. One of the reasons is that the housing market is still
a long way from recovering. It’s simple enough: When people don’t have jobs, they can’t buy houses.Given recent results and data, including January’s decline in existing home sales, I’d say you should think about shorting the homebuilders via put
options on the SPDR S&P Homebuilders (XHB).Learn which other four sectors you
should short.
Are Your Investments Going to Fail You This Year?
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Under Armour (UA)
By Chris Johnson and Jon Lewis
OK, if you didn’t see “The Blind Side,” we highly encourage you to catch it. The last movie we cried at was Rudy (what guy didn’t), but it was close
in a few spots during this movie, which is based on the true story of a homeless teen turned NFL player.Of course, we’re here to make some money on Oscar picks, not get verklempt. If you saw the movie, you probably figured out within the first 10 minutes
that Under Armour (UA) had to have paid a hefty premium for positioning
their product in the movie. (For what it’s worth, Taco Bell (YUM) and
Border’s Books (BGP) were also well-placed companies in the movie.)Looking closer at UA, the sports supplier has been consolidating for all of 2010 as it trades just above a number of intermediate-term trendlines.
The Street recently increased their bearish bets on the stock, as the current short interest ratio for UA has shot above 12. We like these surges
in short interest as they often build the foundation for a short squeeze.Options traders can position for a potential Oscar-induced short-covering rally by buying the UA July 30 Calls (UA 100717C00030000) for
$3.30 or less.Related Articles:
- Top 6 Picks for March
- 5 Ways to Tell a Stock is Headed Up
- How
to Dodge the SEC’s New Short-Selling Restrictions
Are Your Investments Going to Fail You This Year?
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