Market Outlook
Indicators are giving bullish readings, the same as last week. These readings are confirmed by our three main internal indicators, the 200-day Moving Averages Index, Advance Decline Index and Cumulative Volume Index, which all are bullish. And volatility readings continue to trend lower. That suggests a number of ideas for options trading investors.
Recommended Options Trade: Louisiana-Pacific (NYSE LPX)
LPX made a nice long bottom throughout most of the second half of last year, which is a very constructive chart pattern. It has broken above resistance at $10 and looks like it will continue higher. Here is the best way to play more strength in Louisiana-Pacific …
Buy the LPX May 12 Call up to 80 cents ($80 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $12.40. That should give you an option price of about $1.50, for an 87% profit.
Close this position and cut losses if the stock closes below $10.40, when the option price should be about 60 cents. The stock is currently trading around $11.13. The computer-simulated probability of this option hitting its target price is 28%.
Recommended Options Trade: Halliburton (NYSE: HAL)
HAL rallied sharply and broke above resistance at about $41.20. It made it as high as $46.70 before pulling back, but it now looks like it wants to recover from that pullback and move higher. Here is the best way to play more strength in Halliburton…
Buy the HAL Apr 50 Call up to 80 cents ($80 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $48. That should give you an option price of about $1.80, for a 125% profit.
Close this position and cut losses if the stock closes below $43.20, when the option price should be about 50 cents. The stock is currently trading at $44.79. The computer-simulated probability of this option hitting its target price is 26%.
* All of our short-term recommendations can be taken for up to three days after they are recommended. Make sure the stock and option prices are close to where they were when we made the recommendation. If after three days you still have not gotten the position filled, cancel the order and wait for our new recommendations, as the profit probabilities may no longer be valid.
Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
