Play FCX Calls

Plus, Hold FWLT, HES & X

By Bryan Bottarelli
Thursday, October 18, 2007 10:20 AM EDT
Thu, 18 Oct 2007 14:20:00 GMT

Dear Bottarelli Research Member,

It was a very choppy trading session yesterday, which does nothing but cloud the outlook for the market’s next major directional move. I told you yesterday that 14,000 is an important level on the Dow — but unfortunately the Dow closed below this level at 13,892. As a result of this choppy trading, our FWLT November 155 Calls (UFG KK) came down to our original entry price under $9.20. I’ll continue to list a $9.30 entry on our ledger, but many of you were able to enter this position for much less. If you have yet to enter this play, do it now. These calls are currently trading between $7.60 and $7.90, which I consider an attractive buy at these levels. So if you have yet to do so, here’s the play:

FWLT

PLAY: Buy the FWLT November 155 Calls (UFG KK) at or under $8.20, good for the day.

We find the same situation with our HES November 70 Calls (IGG KN). We originally entered these calls on Tuesday for $2.70, and the recent trading action has allowed anyone who missed this initial entry point to establish a position over the next two trading sessions. Since HES established a new 52-week high this week, and oil prices are now pushing $90 per barrel, let’s continue to hold this play for more upside.

HES

Let’s also continue to hold our X November 105 Puts (X WA). I admit, U.S. Steel has been all over the map lately, but all it takes is one sharp market down-move and X could drop $10.00 in short order. The longer the stock trades in this tight range, the more violent the potential downside move — so let’s remain positioned to capitalize on this.

X

In terms of new plays, the company that’s topping the list is Freeport-McMoRan Copper & Gold (FCX – NYSE).Gold prices are making a nice upside move today, and it appears that FCX is hammering out a near-term support point at the $110 level. Let’s go ahead and play this bottom by adding November calls. Here’s the play:

FCX

PLAY: Buy the FCX November 115 Calls (FCX KC) at or under $6.10, good for the day. Current bid/ask spread is $5.40 to $5.80. Place a protective stop limit at $2.80.

*Trading Note: Many of our recent trades have immediately moved our way, but in a market like this, we now need to adjust our time expectations and let some of these positions play out. If you’ll notice, I’m using November expirations for FWLT, HES, X, and FCX, so we certainly have time for these stock movements to occur.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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