Play Ball!

Spring is (almost) here and baseball players are gathering in Arizona and Florida to work out the kinks, play some pepper, take a few swings and get warmed up for the great American pastime — baseball. At least it used to be the great past time. And they’ll probably be doing as much spitting and scratching as swinging any bats.

Still, baseball’s Spring Training is upon us and that means players are stretching their muscles and getting in shape. For us, it’s time for options trading investors to stretch our investing muscles to find some fresh trades that will score profits.

We asked our options experts to consider the season ahead, find a winning team or teams, align those teams with an appropriate stock, and give us an option trade or two that will generate hits.

Not easy, but our team came up with a number of interesting ideas from DirecTV (NASDAQ: DTV) to travel site Expedia (NASDAQ: EXPE) to Cincinnati-based bank Fifth Third (NASDAQ: FITB) and three more.

Cincinnati? Guys, it’s the year of the Cubs.

Check out these trades, you don’t need to be a fan to play.

Hormel Foods (NYSE: HRL)

By Michael Shulman, Editor, Short-Side Trader

Baseball games are all about eating food you know you should not eat. One of the largest purveyors of this kid of food is HRL. There’s been much talk about rising grain prices, specifically the corn used to make too-fat beef even fatter and too-fat hogs even bigger. Meanwhile, the average investor forgets that when grain prices rise, cattle and hogs are slaughtered early, and that reduces short-term prices pressure on companies such as Hormel. And, in the past, the company has been able to pass on increases in the cost of meat. That said, options investors should look at mid-range out-of-the-money calls, June or beyond. HRL was trading around 27 early this week.

Expedia (NASDAQ: EXPE)

By Michael Shulman, Editor, Short-Side Trader

It isn’t just eating hot dogs at the ball park — it is the getting there as well. I am going to spring training to watch my son play — he plays in college — and I found myself using the websites of the hotels, rental car companies and airlines I needed to book. What I did not use was my favorite travel site, Expedia. I recall I followed the same process for a January trip to Rome.

That’s personal but consider these points — EXPE disappointed the Street with a weak earnings report a few weeks ago; Europe, its big growth area, is about to tip into recession; and Americans may be spending more but they are not going to spend on big travel vacations, especially with airfares set to rise due to rising oil prices.

EXPE is rebounding after its bad earnings, so be patient and look at long term puts in EXPE January 2012 or EXPE January 2013 right where the stock is now, the $20 strike.

Dick’s Sporting Goods (NYSE: DKS)

By Sam Collins, Chief Technical Analyst, InvestorPlace

Whatever your favorite team, the DKS logo is on apparel and gear from top name manufacturers, all designed to meet the needs of active players and couch potatoes. And its selection of baseball gear is second to none. Dick’s operates 419 stores in 40 states as well as 90 Golf Galaxy Stores. The stock just broke from a triple top at $38.50 which gives it a trading target of $41. Buy the DKS Apr 38 Calls.

DirecTV (NASDAQ: DTV)

By Sam Collins, Chief Technical Analyst, InvestorPlace

 

 

This is the largest satellite TV provider in the Americas with almost 30 million subscribers. DTV is the premier provider of sports programming and especially baseball games through its special sports packages. It now provides iPad applications which offer baseball and other sports including the coverage of world soccer. On February 22 the stock broke from a double top at $44.50 with a target of $50. Buy the DTV Apr 45 Calls.

PNC Financial Services Group (NYSE: PNC)

 

By Chris Johnson and Jon Lewis, Editors, The Winning Edge

 

When it comes to pro sports in Pittsburgh, the lowly Pirates don’t usually capture the heart of Steel City fans. This is Steelers country, and the Penguins too. The Pirates are likely headed for another season of futility but another homegrown institution has a brighter future.

A mainstay of the regional banking sector, PNC has been trading mostly within a range bounded by the 60 and 65 levels for the past three months. Note that the peak call open interest in the March series resides at the 65 strike while peak puts occupy the 60 strike.  The shares are rebounding off support at 60, a move that looks similar to that of late January when the stock pushed to the 65 mark, its highest level since last May.

PNC’s last earnings report in January beat forecasts due to reduced loan losses. With some technical tailwinds pushing the shares higher, we like the PNC April 60 Call for $3 or less. Let this trade take away some of the disappointment long-suffering Pirate fans will likely endure once again.

 

Fifth Third Bancorp (NASDAQ: FITB)

 

By Chris Johnson and Jon Lewis, Editors, The Winning Edge

 

A major surprise last year was the play of the Cincinnati Reds, who claimed the National League’s Central Division crown. Here’s another surprise. Cincinnati-based FITB is one of the biggest movers since the March 2009 bottom, gaining a whopping 1,260% in about two years.

The Reds probably won’t sneak up on anyone this year as they are one of the favorites to win the division again. But FITB may pull a surprise given that it’s fallen nearly 14% from its February high. Part of the decline is due to the SEC investigating accounting and reporting procedures. But that news appears to be priced into the shares and the stock is finding some support at its 100-day moving average. What’s more, the company has repaid its bailout (TARP) debt, something other regionals have not been allowed to do.

With the stock looking oversold and technical support in place, we like FITB’s near-term prospects. Analysts continue to doubt the company, with just a third rating it a “buy.”  That means plenty of room for future upgrades. Buy the FITB April 13 Call for a little more than a dollar. Look for a solid profit before Opening Day.