Ring in the New Year Right

It’s tough to say what 2011 will bring for investors, so it’s critical that you remain nimble and trade the trends as they unfold. And the best way to do that is with options. The beauty of options is that they allow you to leverage a stock’s move while tying up significantly less capital. What’s more, when buying straight puts or calls, the most you can lose is what you put in.

Less money at risk, the ability to make outsized gains and the agility to move with the trends — sounds like the perfect strategy for 2011! So we went to our options experts and asked them to give you their best trading ideas for the year ahead.

From the best in the biz straight to you, here are our top trades for 2011.

ADBE April 31 Calls

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

As the market continues to emerge from the crisis, investors will be looking for stocks with strong growth as well as market share in 2011. Adobe Systems Incorporated (NASDAQ: ADBE) fits the bill as it set new revenue records last quarter and maintains its position as the multi-media software leader.

Adobe struggled in early 2010, but has been driving big numbers since then, which means the company has plenty of room to run. Technically, the stock could easily beat the highs set in 2009, following a breakout from its emerging descending wedge pattern, for a short-term move of 25% or more.

To take advantage of future revenue records, we like the ADBE April 31 Calls, which are currently trading for around $2.25.

KO May 70 Calls

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

If you are looking for a chart that illustrates the textbook definition of an uptrend, look no further than Coca-Cola Company (NYSE: KO). Since early July 2010, KO has been in an otherworldly 45-degree uptrend that doesn’t look like it’s going to stop anytime soon.

The secret of the company’s success is wrapped up just as much in its dominant global footprint — with broad exposure in more than 200 countries — as it is in its secret formulation of Coca-Cola Classic, not to mention the myriad other popular drinks the company produces.

Looking back at KO’s earnings reports this year, the company beat analyst expectations by 6 cents in Q1, by 3 cents in Q2, and by 3 cents in Q3, and it looks like this trend will continue. In fact, if you go back through 2006, you will be hard-pressed to find a quarter when the company didn’t beat expectations.

To take advantage of this global juggernaut, consider buying the KO May 70 Calls, which are currently trading around 70 cents.

CSCO July 20 Calls

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

Last quarter’s earnings season wasn’t kind to Cisco Systems, Inc. (NASDAQ: CSCO) as the stock sold off after the networking giant released its outlook for 2011. Now, after spending the past two months forming what appears to be a long-term bottom, shares of CSCO are setting up to start 2011 on a move higher — one that we see stretching through the next year.

CSCO has been, and always will be, one of the leaders when it comes to networking equipment. It’s true that its recent foray into retail devices like Linksys routers and Flip video cameras may make the company appear weaker on the corporate side, but make no mistake, CEO John Chambers will lead the company back to its glory, especially as financial and spending outlooks for 2011 begin to grow more optimistic.

We consider $20 a bargain for CSCO shares and expect to see the price move toward our target of $25 before traders start contemplating whether they should “go away” in May. We like the CSCO July 20 Calls, which are currently trading for $1.86, to leverage the movement in the stock and as a potential money-doubler for 2011.

KRE June 26 Calls

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

Part of our approach is to find stocks, or groups of stocks, that are performing well despite a negative outlook from the market. There are few exchange-traded funds (ETFs) that sum this situation up better than the regional bank ETF. 

During December, the SPDR KBW Regional Banking ETF (NYSE: KRE) have been among the top five performing ETFs. At the same time, shares have seen a big increase in short interest while the companies that compose the ETF are among some of the more lowly ranked stocks, according to the recent analyst rank data from Zacks.

The rare opportunity to get back into the regional bank stocks before analysts start to upgrade them is here, NOW. Being in front of the analyst community before they begin to upgrade a sector means that you will benefit from the crowd that begins to buy these stocks in 2011.

To leverage this move, we like the KRE June 26 Calls, currently trading around $2.25. A move to our intermediate-term target of $30 will ring in the new year with a double during the first half of 2011.

DBB July 22 Calls

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

Commodities should generally outperform the market in 2011, with industrial-use metals leading the pack. Since the PowerShares DB Base Metals Fund (NYSE: DBB) is composed of futures contracts on some of the most widely used metals, such as aluminum, zinc and copper, it is a strong candidate for a powerful move higher in 2011. 

Where gold has risen as a safe haven, but priced only on investor demand, base metals are priced on a combination of investor demand and industrial use. DBB is the largest futures-based metals fund with one-third invested in copper and the remainder in other metals that are in demand due to an expanding world economy. The price of copper has risen about 50% in the past six months and, according to industry analysts, there is no top in sight. Copper’s market is very tight with a flat supply and increasing demand from China, Europe and the United States. 

Buy the DBB July 22 Calls, which are trading for around $3.20.

BAX Jan 2012 55 Calls

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

Baxter International Inc. (NYSE: BAX), a global medical products and services company, is a leader in critical therapies for life-threatening conditions. The company’s profit margins are expected to improve from 2010’s 51.4%, and revenues are expected to rise by about 5%, according to S&P. But recent challenges to the health care reform act, if successful, could have a strong positive impact on Baxter’s earnings, which are currently estimated to be $4.30 in 2011, up from $3.98 in 2010. 

S&P maintains a “four-star buy” on the stock with a 12-month target of $58. But that target could be achieved much sooner if the recent triple-top is penetrated and the stock moves into the open gap at $52 to $58. 

Buy the BAX Jan 2012 55 Calls, which are trading around $3.10.

PFE Jan 2013 12.50 Puts

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

Pfizer Inc. (NYSE: PFE) presents a unique short-side opportunity in 2011. Lipitor, the best-selling cholesterol drug, which accounts for more than $12.4 billion in revenue, will lose its patent protection next year. The company has no replacement in the pipeline and has chosen Ranbaxy Laboratories to manufacture the “authorized generic.” But once the six-month exclusivity of the generic guaranteed by the FDA wears off, others will enter the market.

Look for the $12 billion drug to become a $2 billion drug — if Pfizer is lucky. The patents expire in Q4, but the spreadsheet mavens on Wall Street will be plugging in falling sales long before that. PFE has no new major drugs, revenues are otherwise flat to down, and the company can only layoff people for so long to maintain that 4%-plus dividend.

Currently north of $17, the stock is really worth around $8. Take a look at the PFE Jan 2013 12.50 Puts, which are trading for around $1.

TEVA Jan 2012 60 Calls

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

Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) is the perfect paired trade with the Pfizer Inc. (NYSE: PFE) puts I recommended. The company is the world’s largest manufacturer of generics and also has a proprietary product line led by one of the leading drugs for multiple sclerosis, Copaxone. Because of this, gross profit margins are well above average for a generics company, and this has enabled Teva to distance itself from its competitors.

And when Pfizer’s blockbuster cholesterol drug Lipitor comes off-patent, this opens the door for Teva to enter the market with a generic. Look at TEVA Jan 2012 60 Calls, which are currently trading for around $2.10.