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Option Tip – Thursday, 6th October, 2011
AXL and SKS Put Options



Option Tip No 1.

LEAPS put on American Axle & Mfg Holdings, Inc. (AXL)

AKS-100611

Business Description

American Axle & Mfg Holdings, Inc. (NYSE: AXL) manufactures, engineers, designs and validates driveline and drivetrain systems & related components & chassis modules for light trucks, sport utility vehicles, passenger cars, crossover vehicles & commercial vehicles.

Related Information

In the short term, the put/call open interest ratio (SOIR) for AXL stands at a meager 0.28, confirming that calls almost quadruple puts among options set to expire within three months. This ratio only ranks in the sixth percentile of its annual range, suggesting that short-term options players have been more pessimistically oriented toward the stock at least 94% of the time during the past year.

Conversely, short interest on AXL has spiked by more than 31% over the past month. Bearish plays now account for a lofty 17.54% of the equity's float. At the stock’s average daily trading volume, it would take more than four and a half days to cover these shorted shares.

Analysts seem to be on the fence regarding the auto parts manufacturer. According to Zacks, there are three "buy" or better ratings, compared to four "holds" and one "sell."

AKS parts

AXL's technical data shows that the stock is currently down more than 37% year-to-date. The stock's downtrend started in January, and has been highlighted by resistance at AXL's 10-week and 20-week moving averages.

At last check, AXL is up around 9% and is trading at $7.70.

The Option Tip

The option tip is to buy the AXL LEAPS - January 2013 7.50 put.


Option Tip No 2.

Put play on Saks

saks

Business Description

Saks Incorporated (NYSE: SKS) is an upscale fashion retail organization offering an assortment of luxury fashion apparel, shoes, accessories, jewelry, cosmetics and gifts.

Related Information

Saks (SKS) is expected to report strong September sales tomorrow, but according to data available, this will not be enough to halt the slide experienced over the past year.

SKS' 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio rests at 1.33, which ranks in the 70th percentile. Short interest on the stock has gone up by 16.3% over the past month. These bearish bets make up an ample 34.2% of the equity's float. It would take nine days to cover these shorted shares at SKS' average daily trading volume.

saks - bags

Analysts following the retailer seem to feel lukewarm at best. According to Zacks, SKS has two "buy" or better ratings, compared to four "holds" and one "strong sell."

Technically speaking, SKS has shed more than 17% of its value year-to-date. Also, the stock seems to have found some recent resistance at its 10-day and 20-day moving averages, which just completed a bearish cross.

In the final hour of the session on Wednesday, SKS is up about 6.35% and is trading at $8.87.

The Option Tip

The option tip surrounding SAKS (SKS) is to buy the January 2012 7.50 put.

”Success is simple. Do what's right, the right way, at the right time.”



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