Looking Good!

Three Call Plays Up, Add Two New Puts

By Bryan Bottarelli
Monday, May 01, 2006 3:22 PM EST
Mon, 1 May 2006 20:22:00 GMT

PLAY: Sell half of your ADM May 35 Calls (ADM EG) at or above $3.70, good for the day. Hold the remaining half.

PLAY: Buy the BDK May 95 Puts (BDK QS) at or under $3.40, good for the day. Place a protective stop loss at $2.00.

PLAY: Buy the PFCB May 45 Puts (HUO QI) at or under $3.10, good for the day. Place a protective stop loss at $2.00.

Dear Bottarelli Research Member,

So far so good!

All of our news plays are showing profits today, so it appears like our entry-prices were well timed.

Schlumberger (SLB – NYSE) has hit a new 52-wek high at $71.40, which has pushed the SLB May 70 Calls (SLB EN) that you bought for $2.70 up to a high of $3.20 today.

Southern Copper (PCU – NYSE) has also done its best to remain above the $100 level, which has pushed your May 100 Calls (PCU ET) from your $3.50 entry price up to a high of $4.10.

In terms of Archer Daniels Midland (ADM – NYSE), the stock is really popping as we head into their earnings announcement. Just look at the chart:

ADM

The May 35 Calls (ADM EG) you entered this morning for $3.30 have traded as high as $4.10. That’s good for a 24% gainer in a matter of hours!

With a nice gain like that, I’d like to adopt the same philosophy that I did with the PTEN calls on the eve of their earnings announcement. That is, I’d like to use today’s gains to sell HALF of your ADM position — and hold the remaining half for tomorrow’s announcement.

Of course, if you’d rather take the conservative route, feel free to take all the gains off the table today. And of course, if you’d like to swing for the fences, do not sell half — just hold it all going into tomorrow. But for the purposes of our model portfolio, the wise tactical move is to take HALF your winnings off the table.

TAKE PROFITS: Sell HALF of your ADM May 35 Calls (ADM EG) at or above $3.70, good for the day. Hold the remaining half.

Now, to balance out the three call positions we have, I’d like to add two new puts to the ledger. The first comes in the form of tool-maker BDK.

Black & Decker (BDK — NYSE) recently reported that their net income fell 22% — as their first-quarter net income of $113.1 million came in well below the $144.8 million they reported last year. After a strong run-up, it looks like the stock is losing momentum.

BDK

PLAY: Buy the BDK May 95 Puts (BDK QS) at or under $3.40, good for the day. Place a protective stop loss at $2.00.

P.F. Chang’s (PFCB – NASDAQ) is a stock that’s trading at roughly 33 times full-year earnings — but unfortunately, their earnings are not living up to those lofty multiples.

Their recent sales of $228.6 million were in-line with estimates, but that doesn’t warrant a premium for the stock.

PFCB

PLAY: Buy the PFCB May 45 Puts (HUO QI) at or under $3.10, good for the day. Place a protective stop loss at $2.00.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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