Two Intriguing New Plays

FDC Offers You

Dear Bottarelli Research Member,

I’ve come across an interesting situation that I’d like to share with you. As you’ll see, you have a one-time opportunity to receive free stock courtesy of a company called First Data Corp (FDC – NYSE).

First Data provides electronic commerce and payment services for businesses and consumers in 271,000 locations in 200 countries. If you look at the chart below, the stock caught my attention in early September when it established support at the 50-day moving average — logging a very strong upside rally taking it up to its 200-day moving average. But it wasn’t until I began my due diligence that I discovered a unique and rare opportunity that’s now available to FDC shareholders. Here’s the scoop:

On September 8th, FDC’s Board of Directors approved a tax-free spin-off of Western Union. Any FDC shareholder as September 22^nd will automatically be issued one share of Western Union stocks for each one share of First Data common stock held.

This distribution of Western Union shares is expected to occur on September 29^th — and it would not have occurred if First Data had not received a favorable tax ruling from the Internal Revenue Service with respect to the spin-off. You see, thanks to this fantastic ruling, holders of First Data common stock will not be required to pay any cash or other consideration for the Western Union shares they receive. It’s called a “when issued” public market for Western Union common stock, which will trade on the New York Stock Exchange under the trading symbol “WU.” Bottom Line: FDC shareholders will receive free stock in Western Union. How great is that!?

If that weren’t enough, First Data also just announced a regular quarterly dividend of $0.06 per common share payable on October 12^th to shareholders at the close of business on October 2^nd. With both of these events happening in the next few weeks, I’d be very surprised if anyone sells their FDC shares. In fact, I’d expect investors to be accumulating the stock all the way up to September 22^nd to get the free WU stock. Based on that bullish thesis, I’d like to enter into a position in FDC October calls.

*Trading Note: Based on the opportunity presented above, you could also buy FDC stock to collect the special WU disbursement. Or you could buy the calls and then exercise them prior to September 22^nd to literally “rent” 100 shares at a time — and then cash them in for a special 2 for 1 deal prior to September 22^nd. I’ll leave these decisions up to you. But for the purposes of BottarelliResearch, we’re buying calls now!

PLAY: Buy the FDC October 42.5 Calls (FDC JV) at or under $3.40, good for the day. Current bid/ask spread is $3.10 to $3.30. Place a protective stop loss at $2.00.

I’d also like to establish an upside position in Clean Harbors (CLHB – NASDAQ). Clean Harbors is a stock I’ve been monitoring for quite a whole. They provide environmental and hazardous waste management services in the United States, Puerto Rico, Mexico, and Canada — which includes the disposal of hazardous and non-hazardous wastes, fuel blending, wastewater treatment, disposal of laboratory chemicals and household hazardous wastes, oil spill cleanup, railcar cleaning, and oil and oil product recycling. As you can see by the chart, CLHB just hit a fresh 52-week high followed by a profit-taking sell-off. But now the stock has found support at their 50-day moving average and is actively moving higher.

Based on this support point, I’d like to play an upside move back above $42.00 a share using the CLHB October 40 Calls. Here’s the play:

PLAY: Buy the CLHB October 40 Calls (QPB JH) at or under $2.75, good for the day. Current bid/ask spread is $2.40 to $2.65. Place a protective stop loss at $1.80.

Finally, I’d like us to remain patient on General Mills (GIS – NYSE). As you can see by the chart, the stock is falling based primarily on a downgrade from J.P. Morgan, who believes the company has little opportunity to pass on higher commodities costs by raising its prices.

Of course I disagree with this viewpoint and consider the recent gap-down a buying opportunity — especially since the stock will find support at the 50-day moving average just under $53.00 a share. I’m looking to add more GIS January 60 Calls (GIS AL) to our position when the timing is right. Until then…

Lock and load!

Sincerely,