Put Some Holiday Cheer in Your Portfolio

The holidays are a time of giving, and our options experts have a little something for the loyal readers out there: options trading picks that will surely bring you some holiday cheer. While you may be cursing the return policy at the store where your wacky aunt picked out that festive reindeer sweater, we’re pretty sure you’re going to love the returns you get from these trades.

From our family to yours, we wish you a safe and happy holiday and a very profitable New Year!

Macy’s (M) Feb 26 Calls

Recommended by: Sam Collins, Editor, Daily Trader’s Alert

Investors may be feeling the magic of Macy’s, Inc. (NYSE: M) this holiday season. The retailer, which operates 850 department stores under the Macy’s and Bloomingdale’s names, has been optimistic about holiday sales.

The stock has been climbing its 50-day moving average since September. In the past month, it has twice tried to break to new highs and is now accelerating its upside volume for a final push through a triple-top. 

S&P rates the stock a “four-star buy” with a price objective of $29. But the technical target could be as high as $34. Buy M Feb 26 Calls.

Patriot Coal (PCX) Feb 18 Calls

Recommended by: John Jagerson and Wade Hansen, Options Coaches, Turbo Trader Live

For years, you have been told that getting a lump of coal in your stocking is a bad thing. However, with the commodity price inflation we have seen during the past few months, and the seemingly unquenchable demand China has for this and other raw materials, getting a lump of coal in your stocking this year might not be such a terrible proposition. Of course, if you are looking for another way to invest in surging coal prices, you may want to consider Patriot Coal Corporation (NYSE: PCX).

After hitting a low around $10 in late August, PCX has been steadily climbing higher. The stock bounced off of support at $16 in mid-December — a level that served as a staunch resistance in November — and it looks like it will be making an assault on the next resistance level at $18.50. To take advantage of this move, buy PCX Feb 18 Calls.

Tiffany & Co. (TIF) Jan 65 Calls

Recommended by: Chris Johnson and Jon Lewis, Editors, The Winning Edge

Few items under the Christmas tree get more attention than the little blue box. The upscale retail trade is back, and you need look no further than Tiffany & Co. (NYSE: TIF) to see the evidence. The stock is on a monster run, gaining more than 60% in less than four months to sit at an all-time high.

To be sure, a lot of TIF’s success is due to growth in Asia, where sales (excluding Japan) were up 31% during the first nine months of the year. That figure swamps the far-from shabby 12% growth seen in North America. And with holiday shopping turning in its best season in years, TIF’s growth should continue.

TIF option premiums have been coming down for the past several months and are more favorably priced than any time since April. Buy TIF Jan 65 Calls to leverage the expected holiday success.

Apple (AAPL) Covered Calls

Recommended by: Michael Shulman, Editor, Short-Side Trader

Apple Inc.’s (NASDAQ: AAPL) iPad is one of this year’s hottest gifts. But I doubt anyone would be too disappointed if they unwrap an iPod Touch, iPhone or MacBook either on Christmas morning. And I bet plenty of people will be. Apple products accounted for 55% of the boost to overall retail sales in Q2, according to David Berman, president of Durban Capital.

One way to play Apple conservatively is to write covered calls each week (I typically write mine on Thursday morning) for a strike that is $5 higher than the price of the stock at that time. That strategy currently gives me a 16% return, plus the appreciation of the stock.

I think AAPL will start the new year at about $320-$325. With earnings on the horizon, I have an upward bias on the stock. So, if AAPL is $325 or lower, you can write a covered call using weekly options, specifically write AAPL 330 Weekly Calls on Thursday mornings until the week the company reports earnings (I’d sit that particular week out). If you get called out of your stock, you will still be up 2% in two trading days. Keep repeating this process all year long and the math is compelling.

Energy Select Sector SPDR Fund (XLE) Feb 68 Calls

Recommended by: Sam Collins, Editor, Daily Trader’s Alert

Baby, it’s cold outside! A frigid winter in both North America and Europe, along with the Fed and central banks in Europe printing money to prop up their failing economies, have resulted in much higher energy prices.  

This Energy Select Sector SPDR Fund (NYSE: XLE) should mirror the performance of stocks in the Energy Select Sector Index. The ETF broke a major double-top at $62 on a high-volume gap and could be headed to $70. Buy XLE Feb 68 Calls.

Blue Nile (NILE) Feb 60/65 Call Spread

Recommended by: John Jagerson and Wade Hansen, Options Coaches, Turbo Trader Live

Diamonds make a great gift for that special someone, and a certain diamond seller could be a nice “gift” to your portfolio after the first of the year. Blue Nile, Inc. (NASDAQ: NILE), an online retailer specializing in diamond and gold jewelry, is a stock we have been watching recently with some interesting growth potential. After understating projections in the summer of 2010, the stock was heavily shorted, but ongoing rumors of a potential Amazon.com, Inc. (NASDAQ: AMZN) acquisition and better-than-expected performance this quarter could result in a short squeeze in this small stock.

Retail reports continue to point toward a good fourth quarter, and the stock is likely to pop after the quarter’s close in January. Buy the NILE Feb 60/65 Call Spread. (Learn more about trading options spreads.)

Nike (NKE) Feb 85 Calls

Recommended by: Chris Johnson and Jon Lewis, Editors, The Winning Edge

There’s no doubt that plenty of Nike, Inc. (NYSE: NKE) apparel will be found under the Christmas tree this holiday season. The world’s largest athletic shoe and clothing company has been on fire of late, pushing to all-time highs on the heels of a 30% rally. 

The shares encountered a bump in the road with its earnings report earlier this week.  Although the stock dropped , it’s finding support at its 50-day moving average that also supported a pullback in November.  Actually, we welcome the decline, as it shakes some of the froth out of the shares and gives us a much more desirable entry point. 

Look for NKE to rebound strongly  and continue its uptrend well beyond the holiday season.  Go out an extra month by buying  NKE Feb 85 Calls.