Europe Delivers ... Sort of

Europe has spoken (kind of) and the bulls have listened (sort of). The statement out of Europe provides for interesting evening reading and plenty of reactions tomorrow. On the surface, it feels a little cryptic. Europe was able to buy itself more time while avoiding the wrath of the market, this much is certain. The statement is vague enough to give both bulls and bears firepower into tomorrow, so I don't feel a huge rally is imminent. The bulls do have an advantage after today's action based on the technical picture, but the situation is still too fluid to draw a conclusion just yet. Visa (V) is one of the bigger names after the bell that I am looking at playing. Again, I am sticking with range-bound price plays with weekly options. The winners have been solid and the losers have left very small losses. We've seen enough craziness this week, but I have V targeted at $88 or $95 after earnings. My one worry is a draw to $90 for a pin on Friday, so anything other than short options, which I am not playing, may have to be adjusted quickly. Again, I stay with my unbalanced butterflies in both directions. I will stay with them until they stop working. In this case, I'll go long two Oct. 28 $92.50 calls, short three Oct. 28 $95 calls and long one Oct. 28 $97.50 call. I'll do the same ratio for puts using the weekly $90, $87.50 and $85 strikes, respectively. The total cost is around $2.30. The breakeven areas are $93.65 and $88.85. Anything above or below these levels will be profitable at Friday's expiration. The max value is $5 at either middle strike and $2.50 on any move beyond the outside-most strikes. For those opposed to more complex trades, I looked at a few companies reporting to try to find some more basic trades I would feel comfortable with on both the bullish and the bearish side. In the bull camp, I favor AXT (AXTI), going long with a price target around $6.25 and potential upside to $6.40. My lotto ticket play would be Mine Safety Appliances (MSA) Nov. $35 calls at $0.40. I have to say I have a soft spot for MSA since my grandfather worked there for many years. Also, from an aggressive standpoint, I like the upside risk-reward for Ancestry.com (ACOM) Nov. $25 calls and Artic Cat (ACAT) Nov. $17.50 calls. ACAT has the much better looking chart, although the most prudent thing may be to buy any breakout caused by a positive reaction to earnings. Finally, the Nov. $35-$40 call spread on LogMeIn (LOGM) for $1.75 is one I will play. On the bearish side, Akamai Technologies (AKAM), Avon Products (AVP), Perrigo (PRGO) and Teradyne (TER) all fit the bit. PRGO has been solid each quarter, but the stock continues to sell off on its reports anyway. I wouldn't want to be long when they disappoint, but here I would favor the Nov. $100 puts. AKAM is trickier and I wouldn't get too aggressive to the short side. My target here is $20 to $20.80, so a simple Nov. $24-$20 put spread for $1.50 is attractive. AVP is a little different. I will buy the Nov. $24-$21 put. If this one does drop, then I will look to sell the November $24 put but hold the short put and buy the stock if it falls below $21. I want to be a buyer in the $20.50 to $21 range. Another approach is to sell the extra Nov. $21 put now, but I'll pass on that here. TER has been propped up by buyout rumors, but earnings could send this back to $12.50, so Nov. $14 puts around $0.90 is where I would go here. There are a lot of potential plays but beyond V, none I would be very aggressive buying. In other words, capital risk should be very small. Furthermore, I don't think I would chase them all. Look over a portfolio and see how they may fit in, especially as a hedge against existing positions. Finally, know your enemy. Citrix Systems (CTXS) usually punishes me on earnings. Notice its absence from my list.

Europe Delivers ... Sort of

The news out of Europe is vague enough to get something going tomorrow, but nothing huge.

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