In a Yahoo.com online article entitled, 7 trading ideas for today, the widely visited financial website listed several stocks it was bullish on. PowerOptions weblog wanted to take a closer look at those picks and see if there was a way to use options to give investors a potentially safer investment while still generating solid profits.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_04_04_RubyRed.mp3
Red Hat (RHT) and Ruby Tuesday (RI) were listed in the article because they have a 2 period RSI reading below 2 and are trading above their 200-day moving average. RSI, or relative strength index, is a technical analysis tool widely used by investors to predict future stock movement.
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Yahoo also notes the site has given Red Hat an 8 and Ruby Tuesday a 7 with its power ranking system.
A broader look at news surrounding these stocks shows Ruby Tuesday is scheduled for an earnings call on Wednesday, April 11. Earnings are expected to be around $0.53 a share for the quarter. This is up from the $0.28 a share announced in November of 2006.
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As far as Red Hat, a Motley Fool article last week made the following remarks, “In fiscal 2006, Red Hat added 160 net new employees. The company started fiscal 2007 with a global staff of 1,100. We don’t know how many came on board during the year, but management expects to hire about 100 people per quarter this year. That’s a pretty significant hiring rate for such a modest operation.”
Competitors:
Competitors for RHT include: Microsoft Corp. (MSFT), Novell Inc. (NOVL), and SCO Group Inc. (SCOX).
Competitors for RI include: Applebee’s International Inc. (APPB), Brinker International Inc. (EAT), Carlson Restaurants Worldwide, Inc. (private), and RARE Hospitality Intl. Inc. (RARE).
Potential Trades:
All of the following option trades have 45 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| PowerOptions covered call search (45 days) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
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| RHT | $22.15 | RHTED | 07 MAY $20.00 | $22.55 | 11.50% | 2.00% | 2.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RHT | $22.15 | RHTEX | 07 MAY $22.50 | $0.90 | 4.10% | 4.20% | 5.90% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RI | $28.46 | RIEE | 07 MAY $30.00 | $0.55 | 1.90% | 2.00% | 7.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RHT – Red Hat develops and engineers computer software and the Linux operating system. The first trade involves the May $20 call option and offers 11.5% downside protection and 2.0% potential profit if the stock is above the $20 strike price at the end of the option period. The second trade, a less conservative trade, involves the May $22.50 call option and offers 4.1% downside protection and 5.9% potential profit if the stock is above the $22.50 strike price at the end of the option period. The stock is currently trading at $22.15.
RI – Ruby Tuesday operates the Ruby Tuesday restaurant chain. This trade involves the May $30 call option and offers 1.9% downside protection and 7.5% potential profit if the stock is above the $30.00 strike price at the end of the option period. The stock is currently trading at $28.46.
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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PowerOptions‘ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags] Motley Fool, Carlson Restaurants Worldwide, Inc., APPB, Applebees International Inc., EAT, Brinker Intl. Inc., MSFT, Microsoft Corp., NOVL, Novell Inc., RARE, RARE Hospitality Intl. Inc., RHT, Red Hat Inc., RI, Ruby Tuesday, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]