The case for long LEAP calls

The case for going long on LEAP Calls

• Massive downturn over the past year
• Should lead to a broad rally within the next couple of years
• Lots of company stock prices are sure to rise

• Identify sectors that have been beaten down and are likely to rise due to mega-trends
• Find good names in each that have been beaten down but will be in demand
• Find ones with cheap LEAP Calls
• Go long: 2012 Calls, < $1
• e.g. HomeBuilders, Financial companies, Healthcare (esp. related to epidemics which are likely to rise), autos?

Punished sectors likely to rise again: XLF,ITB
- Find the recovery leaders of each sector

Other sectors, stocks likely to rise:
Technology: MOT (handheld computers), YHOO (new CEO), XRX (new CEO)
Disease mgmt/Epidemics
Energy storage/Battery
Transportation

Is BSX poised to take off?

A five-year declining trend seems to have reversed at the beginning of 2009. A new CEO has taken over in July '09.

The five-month trend lines are clearly rising; lower trend with a slope of 0.8/mo; upper trend line with a slope of 0.6/mo. MACD is leading. There are small peaks of 0.5, each time leading to a pullback but slowly rising overall.

There are two contenders for Call options:

Jan 10, 11.00@1.10
delta: 0.51 theta: -0.0037 IV: 42.6 gamma: 0.1291

Jan 11, 12.50@1.70
delta: 0.495 theta: -0.0022 IV: 44 gamma: 0.0703

Let's try the Jan 11 option and check back in a month. If BSX has crossed 11 by then, option prices should be higher.