Spring has Sprung

Spring is here and now is the time to take a look at the portfolio, reconsider the winners and losers, and prepare for the rest of the year. After all, the market has been on a roller coaster for the last six months, climbing to overtake 12,000 and then falling on news of the turmoil in the Middle East and the disastrous events in Japan. But even with these challenges the rally hangs on.

Options trading investors know that options are tools well-suited to helping investors add and drop holdings. A covered call can generate premium income while setting a sale price for that equity you are considering getting rid of. Buying a put will cost you but the trade sets a sale price for that unwanted equity, possibly helping your peace of mind.

We’ve asked our options experts to provide some spring cleaning options trades that will help you decide the best way to freshen up your portfolio and start anew this year. Find here suggestions ranging from homebuilder PulteGroup (NYSE: PHM) to tooth cleaner Colgate-Palmolive (NYSE: CL) to travel site Expedia (NASDAQ: EXPE) and three more.

PulteGroup (NYSE: PHM)

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

Homebuilders have been rocked of late with bad news. Housing starts are the lowest since April 2009. Existing home sales declined nearly 10% in February. New home sales tumbled to the lowest level ever. Mortgage rates are creeping higher and loans are expected to get more expensive. What’s to like?

Well, apparently Goldman Sachs found something to like, as it upgraded PHM this week. That allowed the stock to hit a one-month high. But it also ran headlong into its 100-day moving average, a trend line that has kept the stock in check for two months.

With the upgrade priced into the shares, it’s time for the fundamentals and technicals to take over. That means PHM is primed to fall and needs to be scrubbed from your portfolio. Or you can buy the PHM April 8 Put for around 75 cents. A drop to the March low around 6.50 should result in at least a double for this trade.

Deere & Co. (NYSE: DE)

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

For the record, we love DE. The fundamentals in terms of higher food prices and farmers buying more equipment is a great story … for the longer term. For the short term, however, the stock could have some problems. If you own DE, hold onto it. But consider buying an April put to take advantage of some potential downside.

The shares have been flat for the past month, struggling with their 20-day and 50-day moving averages. We could see a return to the 100-day in the 85-86 area, where the stock found solid support just last week.

Everyone seems to love DE, which could be a problem. The put/call ratio is at an annual low, short interest is virtually invisible, and 16 of 19 analysts rate the stock a “buy.”  How can you inject more optimism into the stock? That tells us that we could see some selling pressure in the next couple of weeks.

Look at buying the DE April 90 Put for around two bucks. A drop to the 100-day would definitely have you cleaning up with at least a double on this trade.

Verizon (NYSE: VZ)

By Michael Shulman, Short-Side Trader

Spring means cleaning the house and garden for many. Not me, too lazy. So when I think of spring I think of fun things and the expression “hope springs eternal.” The first great hope of spring is the impact of the iPhone and the iPad at Verizon (NYSE: VZ). This is a game changing event — hence the proposed acquisition of T Mobile by AT&T (NYSE: T), the former exclusive purveyor of these Apple (NASDAQ: AAPL) products. Verizon is also going to do better than any analyst is projecting, this year and next. Its 4G network does not support the newest Apple products but that will change down the road. Look long term on VZ LEAPS — I like out-of-the-money contracts in January 2012.

Expedia (NASDAQ: EXPE)

By Michael Shulman, Short-Side Trader

Another hope for spring, other than the Washington Nationals play at the major league level this year, is that travel will pick up. It will not — and many who travel will do it by car as airfares rise due to increased jet fuel costs. Oil prices may continue to rise. I just came back from the Orlando area, it was somewhere between deserted to empty compared to past years, and a two minute wait at security in the airport. That is the U.S. — it is worse in Europe as austerity, fears of austerity and the beginnings of the Next Great Recession hit. What to short? Expedia (NASDAQ: EXPE), terrific company and site, I use it, but it’s in the wrong place at the wrong time. Look at out-of-the-money puts that expire mid-summer or beyond.

Bristol-Myers Squibb (NYSE: BMY)

By Sam Collins, Chief Technical Analyst, InvestorPlace

Although many research firms maintain a “Hold” recommendation on BMY, the stock has been a non-performer, currently selling at just $2 more than in March ’09.  Many investors have held BMY as a “bond substitute” since it pays a dividend of $1.32 (5%), but if interest rates on bonds rise then this stock will be subject to the same selling pressure as bonds. Technically the stock is in both an intermediate- and long-term downtrend with resistance at $27 to $28. Long-term holders who refuse to sell the stock may wish to increase their income by selling the BMY Sep 28 Call for $.50 cents, thus increasing their income from $1.32 (div.) to $1.82 and their yield to 6.9%. If the stock is “called,” they would receive $28 for their stock and keep the $.50 that they received for the option, making the sale price $28.50. If the stock is not called, they may be able to “write” another call and increase their income again.

Colgate-Palmolive Co. (NYSE: CL)

By Sam Collins, Chief Technical Analyst, InvestorPlace

This major consumer products company sold at about $78 two years ago. It has fluctuated between $55 and $85 during that time and currently provides a dividend yield of just under 3%. Like Bristol Myers Squibb (NYSE: BMY), some investors consider CL a “bond substitute” and the stock “stable,” but interest rates will most likely rise later this year. Unless CL is able to provide some tangible growth its market price will most likely falter or remain flat. Long-term holders of CL who refuse to sell can increase their income by selling the CL Nov 85 Call for $1.85 thus increasing their annual income from $2.32 (div.) to $4.17 and their yield to 5.3%. If they are “called” they would receive $85 for their stock plus keep the $1.85 they received for the option, and in effect sell the stock for $86.85.