Options Trading – Super Bowl Option Trades

Go Long and Score

Super Bowl

It’s freezing cold, there’s snow and ice everywhere, and skies are gray. That means one thing – it’s Super Bowl time!

This year two old-guard teams – the Green Bay Packers and the Pittsburgh Steelers – will play in Dallas for the championship. That is, if any flights can get through. It should be a hard-fought, bust ‘em up game. Kind of like the bulls versus the bears. And in-between the hits, companies spend millions on ads to sell themselves to the massive audience watching on television.

For options trading fans, the Super Bowl also offers an opportunity to consider some overlooked companies. Several of our top analysts have mulled over the Big Game and offered up options trades that could prove to be all-time champions.

Home states are represented with Oshkosh Corp. (NYSE: OSK) from Wisconsin, the Packers’ base, and PNC Financial Services Group (NYSE: PNC) from Pennsylvania, Steeler territory. There are fan favorites like Coca-Cola (NYSE: KO), and there are some ideas, like the iShares Silver Trust (NYSE: SLV) with little apparent connection to the game.

Whether you are a fan of football or don’t follow the game, here are eight quick option trades designed to get investors pumped for the game.

KO May 65 Calls

Coke Logo

For some, the actual football game is merely an interlude between the commercials that air on Super Bowl Sunday. One of the commercials that kicked off the tradition of must-see advertising was the 1980 Mean Joe Green commercial for Coca-Cola (NYSE: KO). Mean Joe Green was down and out walking down the tunnel until a little boy managed to lift his spirits with a bottle of Coke.

Well, after an outstanding run higher, Coca-Cola’s stock has dropped down into a tight consolidation range just above $62.50. However, just like Mean Joe Green, it looks like this stock is ready for a pick-me-up. Overseas sales are rising in key markets like China and India at the same time the company has been able to slowly increase prices in those same markets — which should add nicely to the bottom line. Watch for KO to resume its uptrend and move on to new 52-week highs.

“Buy to open” the KO May 65 Calls for $1 or less.

LVS June 49 Calls

Las Vegas Sands logo

For some, there is nothing like a little “skin in the game” to make things exciting on Super Bowl Sunday. If you are a fan like this, you are probably influenced more by your emotions and loyalties when placing a bet than the actual odds on the game, but that is all part of the fun.

However, as investors we have to look at things a little differently. We may win or lose our “bet” on the game but the odds look good for gaming companies that have been consolidating recently. For example, Las Vegas Sands (NYSE: LVS) has been forming a technical ‘descending wedge’ pattern following an incredible recovery in 2009-2010. This is a compelling signal that a breakout could result in a large extension to the upside. Watch for LVS to exceed its highs from last November, potentially reaching the low $60s by the second quarter of 2011.

“Buy to open” the LVS June 49 Calls for $6.00 or less.

PNC May 62.50 Call

PNC Financial logo

PNC Financial Services Group (NYSE: PNC) is a regional bank based in the heart of Steeler country. Last month, the company reported a drop in Q4 income compared to a year earlier, but the results easily topped analysts’ expectations. Also beating the expert view were improvements in loan write-offs and money put aside to guard against bad loans.

Though not a huge performer, the stock is in a solid uptrend, gaining about 24% since late August. The shares are currently enjoying a solid bounce off their 50-day moving average, a trend line the stock used in late November to launch a quick 14% rally.

With the economy on the mend (albeit slower than most prefer), the financials are leading the way higher. PNC is in a strong position to benefit from the rebound and should continue to “steel” its way toward the 2010 high around the 70 mark. Buy the PNC May 62.50 Call for under four bucks.

OSK March 37 Call

OshKosh Corp. logo

There aren’t many Fortune 500 companies in Green Bay (actually there’s one … and it isn’t optionable), so we’ll have to travel about 50 miles southwest of Title Town, USA to the shores of Lake Winnebago. That’s where we’ll find truck manufacturer Oshkosh Corp. (NYSE: OSK), a company that plans to hire in 2011 thanks to a pickup in its defense contract business.

Despite a drop in Q1 revenue and profit reported on January 28, the numbers blew away the consensus analyst estimate. The stock didn’t do much after the report, but it continues to climb higher amid a rally that has covered 30% in the past two months. Using the 20-day moving average as support and with its earnings success on the books, the stock is now is poised to break into territory not seen since last May.

Analysts are hesitant to jump aboard the OSK bandwagon, as six of 14 still rate the stock a “hold”. Any upgrades from this group should give the shares a boost. Add some “green” to your portfolio with the OSK March 37 Call for $2.75 or less.

NBL March 85 Calls

Noble Energy logo

Noble Energy (NYSE: NBL) is an independent energy company that explores, develops, and markets crude oil and natural gas. It is based in Houston so its connection to the two teams in the big game is unclear. Perhaps like the Steelers’ offense, it is ready to go long! Since its operations are primarily in the continental U.S. any rise in the price of crude oil as a result of tensions in the Middle East would be positive event for Noble. On January 28 NBL’s research coverage was started by Wunderlich Securities with a “Buy” recommendation. And on January 31 the stock broke through a triple top at $87 with a trading objective of $100. Buy the NBL March 85 Calls for a pop of 8 points in the stock.

SLV March 28 Puts

SLV Silver Trust logo

Like the Green Bay offensive line opening a massive hole, precious metals have led almost all other sectors, and the iShares Silver Trust (NYSE: SLV) has advanced almost 70% in four months. But on January 3 SLV topped at $30.29 in a buying frenzy that created a support line that was so steep that it was impossible to maintain. The line cracked on January 5 and SLV rolled over, plunging through both its 20-day and 50-day moving averages in just 10 sessions, finally flat lining at $26. The plunge resulted in enormous technical damage. Not only had prices penetrated the moving averages but on January 28 a short-term sell signal was flashed when the 20-day crossed through the 50-day moving average. The crisis in Egypt brought in buyers to precious metals and SLV reacted with a dead-cat-bounce back to its 50-day moving average at $28 where it should be sold. Options buyer should jump on the SLV March 28 Puts for a drive in the ETF to $24 from $28.

GLW March Calls

Corning logo

The Steelers and the Packers. Teams based on commodities – the Packers meaning meat packers – and that’s a pretty good way to trade the Super Bowl. Trade with steel in your spine and then pack it in — hamburgers, bratwurst, whatever. Here are two possible trades to make Super Bowl Sunday a bit more meaningful when you look at that huge flat panel your husband said you did not need.

I remember, when the Internet boom went boom, so did Corning Inc. (NYSE: GLW), trading down to a buck. It has rebounded to $22 and change and has broken out from a slump due to fears about a slowdown in the flat panel display market and in the laying of fiber optic cable. Both fears were well founded — but analysts underestimated the tight controls GLW had on its business and how in tough times it picks up market share because Corning is arguably the technology and manufacturing leader in the glass it produces. And they are not standing on glass alone — they just bought a company that makes antennae systems for the networks that use its fiber optic equipment. You could buy the stock and write calls, sell puts or play the calls straight up. If you do, look close at the GLW March Calls if you think the market has room to run, or GLW May Calls if you think we may have a hiccup along the way.

SFD April Calls

Smithfield logo

While the ladies are watching the Steelers, Packers, and the Black Eyed Peas, their husbands will probably be scarfing down some pretty lousy, fatty, cholesterol-laden food. Some of it will be produced by Smithfield Foods (NYSE: SFD) the big time supplier of all sorts of meat products. I have watched SFD forever – it was one of my first stock investments before I had to worry about my cholesterol – and the stock gets hammered when traders worry too much, as they are now, about core commodity prices. They forget that SFD hedges a great deal and knows how to manage its business. The stock is at a critical inflection point, trying to stay above a recently punched through set of moving averages – the 10-, the 50- and the 200-day. If it stays above for another few days it could run. A high risk trade, look at the SFD April Calls.