Get Devoted to These Trades

Spring will soon be sprung and love will be in the air — Valentine’s Day is upon us. If you’ve waited until the last moment to buy your special someone a present you may want to consider some of these option trading ideas from our coterie of experts. They researched the stocks that suggest romance, love, devotion — and profits.

Our analysts found a nice restaurant chain. Aaah, a loaf of bread, a jug of wine and thou. Don’t forget the cheese cake. Then there’s the jeweler known for its light blue box. Unfortunately it may also leave your wallet a little lighter. And there’s the online wedding planner. OK, maybe your relationship is way past that stage. Here’s one from left field – they own insurance, a railroad, soda and a newspaper. Almost forgot, they also have a chocolate company in Belgium.

Check out our six Valentine’s Day option trades. You might find one to fall in love with.

TIF May 65 Call

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

Diamonds look to be back in, thanks to the luxury goods sector bouncing back quicker than most other areas of retail. In fact, holiday sales at Tiffany (NYSE: TIF) were up in all geographic regions, with the highest increase coming in the Asia Pacific region.  This strength is partly due to TIF’s strategy of expanding its presence in China by focusing on emerging cosmopolitan hubs.

Ironically, TIF’s share price hit an all-time high just a few days before Christmas after rallying 67% in less than four months. The stock then went on a 13% decline over the next month. Now the shares are on the rise once again and look poised to take out their all-time high.

With the economy rebounding and the luxury sector leading the way for retail, TIF is set up for a solid 2011. Allow plenty of time for the upside to play out by buying the TIF May 65 Call for under $3, far less than you’ll pay to put something inside one of those turquoise boxes.

CAKE March 30 Call

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

The Cheesecake Factory (NASDAQ: CAKE) restaurant that as been part of many love stories and marriage proposals operates more than 160 full-service upscale casual dining locations throughout the country. While analysts aren’t as romantic about CAKE’s near-term prospects, the negativity we’re seeing toward the company may actually work in its favor.

The stock took a hit in mid-January after a preliminary report revealed that Q4 revenue wouldn’t meet expectations. That capped an 11% decline off the equity’s December peak.  But the pullback has been well supported by the rising 100-day moving average, a trend line the stock hasn’t closed a day below in more than five months.

Also helping CAKE is a high level of pessimism in the form of a high put/call ratio, robust short interest, and just a third of covering analysts rating the stock a “buy.” That translates into a lot of pent-up buying power waiting to unwind. Solid technical support and strong pessimism is a bullish combination. Show some love by buying the CAKE March 30 Call in the range of $1.50.

NFLX MARCH 230 CALL

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

Now that you’ve got the desert and the champagne is on ice, why not cozy up with your valentine to watch a great movie from Netflix (NASDAQ: NFLX)? The entertainment tech powerhouse reported earnings late last month that blew away estimates again and analysts are scrambling to upgrade the stock despite its run from $100 to $220 in just seven months. Technically the stock is in a bull run making new highs almost daily. The trading target is north of $230. Buy the NFLX March $230 Call.

AMZN March 165 Puts

Recommended by Dawn Pennington

No one has ever succeeded at being “all things to all people,” but despite its recent dismal earnings report, Amazon (NASDAQ: AMZN) still gets an “A” for effort. Amazon’s problem has always been a marketing one. Even as Kindle downloads now surpass paperback sales, the company positions its flagship product as easier to read in sunlight than the iPad. Yawn.

Any Kindle owner will tell you that they bought it because it was easier on the eyes (and wallet). But they love it because of the free 3G, the ability to “lend” books to friends, free two-week trials to their favorite magazine/newspaper, and the ability to read Web sites quickly in a text-only format. (Try doing any of that on an iPad!)

Experts say this stock is going to $200 in a hurry. To profit, short (“sell to open”) the AMZN March 165 Puts in the range of $1.25. That’s money that hits your account immediately. This Valentine’s Day collect some premium on Amazon and use it to buy your sweetie a Kindle. Who says you can’t please everyone?

KNOT July 10 Calls

Recommended by Dawn Pennington

Cupid didn’t have a magical 2010, as the divorce rate went up, the marriage rate dropped, and the U.S. birth rate hit an all-time low.

But weddings and babies never go out of style. For those bullish on relationships and families, The Knot (NASDAQ: KNOT) calls itself a media company and offers a one-stop shop for registries, attire, invitations, flowers and cakes. Susquehanna just downgraded it to “Neutral” from “Positive.” And with earnings due Feb. 10, perhaps the best KNOT can do is to not disappoint any further. But it’s a $10 stock, so even a big miss won’t knock the shares over too much.

KNOT has a great advertiser base, with registry favorites Williams-Sonoma (NYSE: WSM), Target (NYSE: TGT), Crate & Barrel and Pottery Barn vying for eyeballs. Plus, it leads you to vendors in your hometown or to dream wedding destination.

KNOT options aren’t very active, but I like the KNOT July 10 Calls. They’re $1.80 bid and $2.85 ask, so put in a limit order to buy up to about $2.00. With all the summer weddings in store, you could cash out for a big bouquet of returns.

BRK.B Calls

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

The thing you should play on Valentine’s Day is probably chocolate but there is no easy way to do that right now. So look at the industrial company that happens to own a niche chocolate company – See’s Candies. The owner? Warren Buffet’s Berkshire Hathaway (NYSE: BRK.B). The less-expensive B shares.

Many years ago my Valentine lovely — known on other days as my wife — had just returned from work in Bruges, Belgium, the chocolate capital of Europe. She sat next to Buffet at a dinner, knew little about the details of his business and came home telling me he was in person as he was in the press and he recommended a chocolate she had never heard of . I laughed and told her he owned the company and had a serious sweet tooth. Look at calls on the Berkshire B shares. This is a longer term trade — the company had a bump or two last year but is clicking, especially with its new acquisition, Burlington Northern.