Lamar Advertising Ramps up for a Banner Q4

by John Kmiecik | January 2, 2012 11:07 am

Advertising is an important element when starting or maintaining a business. Without customers, a business generally fails. Along those same lines, without a sound trading plan, a trader usually fails as well.

But when you can connect both, it presents a fantastic opportunity for a trader to make some profits from a successful business. And so today, here is a trade idea that combines a solid advertising company AND a bullish trading plan!

Lamar Advertising Co. (NASDAQ:LAMR[1]) announced earnings in early November and handily beat expectations and the previous third-quarter results from the previous year in almost every category. Looking ahead, fourth-quarter revenue is expected to rise as well. The company is expected to announce its next earnings in late February.

With LAMR trading here at $27.50, here’s how you can turn Lamar’s financial success into your own.

The trade:  Buy the LAMR Feb 27 Calls for $1.90 or less.

The strategy: The long call strategy is relatively straightforward. The trade profits when the stock rises and the call premium increases as the LAMR option moves more and more in-the-money (ITM). Maximum profit is unlimited because LAMR can continue to rise and the maximum loss is $1.90 if LAMR finishes below $27 at February expiration.

Technically, since the middle of October, LAMR has been performing nicely and has increased its price by about 50%. Just last week, the stock moved above all its moving averages, including the important 200-day simple moving average.

A possible entry point for this trade idea is above $27.65, which is a recent high. The $30 area might make sense as one possible level to target for taking profits. Consider exiting the position if the stock drops much below the $26 area.

  1. LAMR:

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