Adding Two More Calls

Play DVN and ICE for Quick Pops (PCU Too!)

By Bryan Bottarelli
Monday, May 21, 2007 11:37 AM EDT
Mon, 21 May 2007 15:37:00 GMT

Dear Bottarelli Research Member,

While we patiently wait for the markets to turn lower, I’ve isolated two new call plays that could hand us sizable gains on any last-ditch moves to the upside. The first is a super-cheap energy play — and the second is a more speculative exchange play that we’ve successfully played before.

The energy play comes in the form of Devon Energy (DVN — NYSE). The Rocky Mountain oil gas explorer has set new 52-week highs alongside the rest of the oil sector — yet their at-the-money June calls trade for the bargain basement price of only $1.95. This is a great price compared to similarly-priced oil options, so let’s play a continued run in DVN by adding the June 80 calls now.

DVN

PLAY: Buy the DVN June 80 Calls (DVN FP) at or under $1.95, good for the day. Current bid/ask spread is $1.75 to $1.85. Place a protective stop limit at $0.70.

Also on the move (with a lot of room to run up) is our old favorite InterContinental Exchange (ICE – NYSE). The Internet-based futures and commodities trader has the ability to move up rather quickly, so let’s capitalize on the market’s unrelenting upside momentum to play ICE to the upside as well.

ICE

PLAY: Buy the ICE June 145 Calls (ICE FY) at or under $5.60, good for the day. Current bid/ask spread is $5.10 to $5.40. Place a protective stop limit at $3.00.

I’d also like to comment on the move today in Input/Output (IO – NYSE).The Houston-based company provides land, marine, data, and seismic imaging products to the worldwide oil and natural gas industry, and I took a longer-term bullish position on the stock by recommending the IO August 12.5 Calls (IO HV) for $2.65 back on February 13th.

IO

As I write today, IO has just triggered a new 52-week high at $14.98 which has pushed your calls up to $2.90. Let’s maintain this August position a little longer and try to maximize our profit potential.

Let’s also take an upside position in Southern Copper (PCU – NYSE). The copper, molybdenum, zinc, and silver producer looks to have found near-term support at the $85 level — which could set the stage for another upside run. Let’s get positioned to ride this move via the June 85 calls.

PCU

PLAY: Buy the PCU June 85 Calls (PCU FQ) at or under $4.60, good for the day. Current bid/ask spread is $4.30 to $4.50. Place a protective stop limit at $2.10.

And finally, maintain your downside positions on Intuitive Surgical (ISRG – NASDAQ) and the SPY, as any quick downside jolt will push both of these puts aggressively higher.

ISRG

As I mentioned last week, I’ll be looking to add to the SPY position on any signs of market weakness. So stay tuned, and as always:

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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