Three New Trades

Long Term CAT, Near Term RIG, Short Term LVS

Dear Bottarelli Research Member,

I’ll cut right to the chase.

I have three new trades lined up for today — each with their own time horizon.

First, I have a longer-dated upside play in Caterpillar (CAT – NYSE).

Second, I have a near-term upside play in Transocean (RIG – NYSE).

And third, I have a quick downside play in Las Vegas Sands (LVS — NYSE).

Depending in your trading style, you can take one, two, or all three of the plays. So let’s get right into it.

As you know, CAT has been a stock chart I’ve been closely monitoring ever since they experienced their $13 downside “gift gap” back in mid-October. Now, I think the stock has hammered out a bottom right around the $60 or $61 level, which signals that we could witness some filling of this tremendous gap in November and December. As a result, I think the CAT January 65 Calls (CAT AM) represent a good risk/reward proposition for any longer-term traders. With these calls trading between $1.30 and $1.40, let’s get positioned now!

PLAY #1: Buy the CAT January 65 Calls (CAT AM) at or under $1.50, good for the day. Place a protective stop loss at $0.90.

My second play in RIG is based on two things. One, oil prices that are under $60 a barrel going into the winter months, which could pop back up to $62 or $63 in the blink of an eye. Two, the fact that major oil names like Exxon are publicly saying that they plan to get more aggressive with their oil drilling and exploration, naming places like the North Pole being strong candidates for future drilling projects. This is very bullish for extreme weather drillers like RIG, so I’d like to use the current “soft” prices to establish a December upside position.

PLAY #2: Buy the RIG December 70 Calls (RIG LN) at or under $5.00, good for the day. Current bid/ask spread is $4.60 to $4.80. Place a protective stop loss at $3.20.

My third play is a quick downside mover on Las Vegas Sands (LVS — NYSE). Looking at the chart, you’ll notice that LVS tends to move in predictable upside and downside patterns that last around two weeks.

Right now, the stock is down $4.00 on a classic example of “selling on news.” Today, LVS reported that their revenue rose to $553.2 million from $437.6 million a year ago, which equated to earnings of $0.33 cents a share. Analysts were expecting earnings of $0.29 cents a share, which means LVS beat estimates. Nevertheless, the stock is selling off today as investors looking for strong numbers are taking their profits. This leads me to believe that the stock could easily fall back down to $70 before finding the next support level, so let’s play this short-term down move using November puts.

PLAY #3: Buy the LVS November 75 Puts (LVS WO) at or under $3.50, good for the day. Current bid/ask spread is $3.30 to $3.40. Place a protective stop loss at $2.30.

Lock and load!

Sincerely,