8 Explosive Option Trades

With the brutal beating the market has taken lately, we bet you could use a little R&R � or an excuse to blow crap up. Good thing it’s Fourth of July weekend!

To help you celebrate (and cope), our OptionsZone experts have put together a list of rocket-fueled options trades designed to light up your portfolio.

The summer looks like it’s going to be a rough one for investors, but we can help you net some explosive profits before the summer heat wave is over.

#1 Toro Company Calls
By Sam Collins

The Fourth of July is a great time for a backyard barbeque, but before the family gathers, Dad will want his lawn looking its best. To get the job done like a pro, he’ll need his new Toro Company (NYSE: TTC) riding mower. Toro is the leading maker of both professional turf and residential yard and snow removal equipment.

S&P just raised its opinion on the stock to a “buy” from a “hold” with a 12-month target of $57. Technically, despite the general market sell-off, TTC is above its 200-day moving average and is oversold with a trading target of $55.

Buy the TTC Sept 50 Calls (TTC�� 100918C00050000) at $3 or lower with a target of $6.

#2 P.F. Chang’s China Bistro Puts
By Michael Shulman

The Fourth of July is about all-American food: hot dogs (originally called frankfurters, named after a German city), hamburgers, (named after another German city) and, of course, French fries. So, let’s look at another American staple: Chinese food and P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB).

The food at P.F. Chang’s is pretty darn good for a national chain, but it is significantly more expensive than local Chinese restaurants, and more expensive than many other casual dining restaurants. A recent ChangeWave Research survey tells me there is a fall-off in restaurant spending. PFCB is going to take an unexpected hit.

And when something is selling for more than 30 times projected earnings by my estimates, well, that tells me it’s time to look at put options on a $40 stock that’s worth about $20. If you agree, go for the furthest expiration out and wait for the economy to catch up with PFCB.

#3 Apple Calls
By Chris Johnson and Jon Lewis

What’s more all-American on July 4 than apple pie? How about the iPhone or iPod or iPad? Apple Inc. (NASDAQ: AAPL) is on fire right now with the recent success of the iPad (despite the quirky name) and the 4G iPhone. You have to love a company that has its followers camped out to be among the first to own the latest and greatest.

And now comes word that Apple is slated to release an iPhone for the Verizon Communications Inc. (NYSE: VZ) network early next year. OK, we’ve heard that before, but you know it’s going to happen, if not in January, then sometime down the road. And it will be huge. In the meantime, the company will just have to limp along on its monstrous 4G and iPad sales.

The other thing we like about Apple is that the recent pullback has provided an excellent entry point. After dropping nearly 10% from its June 1 high, the stock is putting in another higher low, meaning that it’s looking ready to make a run at another all-time high, this time above the $300 mark.

To give the stock plenty of time, play the AAPL Aug 280 Calls (AAPL� 100821C00280000). It’s a cheap way to take a bite out of Apple’s strength for most of the summer.

#4 Sprint Nextel Calls
By Sam Collins

To contact the extended family for the big weekend get-together, Mom will probably call them on her Nextel phone through Sprint Nextel Corporation’s (NYSE: S) wide-ranging system.

Despite the heavy selling in the broad market, Sprint broke from a triple-top on very heavy volume, but has pulled back to under $4.25. My trading target is $6, but it could run to $10 by year-end. S&P rates the stock a “four-star buy” and recently increased its 12-month target to $6 from $5.

Buy the S Nov 4 Calls (S���� 101120C00004000) around 80 cents with a target of $2.

#5 Pfizer Puts
By Michael Shulman

Americans love to eat, and this pig-out holiday may just set your cholesterol level over the edge.

The best-selling drug on the market is Pfizer Inc.’s (NYSE: PFE) cholesterol drug Lipitor. Lipitor’s patent expires in November, and within 12 months, Pfizer’s profits will expire with it. The company continues to develop drugs that fail in trial, and it has nothing in its pipeline to replace the $8 billion-$10 billion in sales that will be lost. Plus, the stock’s chart is one only a short seller could love

Look at January 2012 LEAPS. The puts are liquid and reasonably priced. The stock is not worth more than $8 and is selling around $14.50. For purposes of full disclosure, I eat bad food on the Fourth of July, and I also take Lipitor.

Get 7 Tips for Trading LEAPS.

#6 The Boston Beer Company Calls
By Chris Johnson and Jon Lewis

Historically, there are a few groups of stocks that are more recession-proof than others, and alcoholic beverage companies are typically among them. The upcoming Fourth of July holiday makes it easy to talk about one of these companies that we like: The Boston Beer Company, Inc. (NYSE: SAM), producer of Sam Adams beer (named after the Founding Father himself).

The stock has been pressing to new highs, recently breaking above the $70 mark. Despite the incredible relative strength against the market, only half of the analysts covering the stock have it ranked as a “buy.”

Given the fundamental strength and the company’s categorization as a recession-resilient (nothing is recession proof) stock, we like the chances that the analyst community will upgrade this stock over the second half of 2010. Buy the SAM Sept 70 Calls (SAM�� 100918C00070000) as a good way to leverage SAM’s move higher.

#7 Toyota Motors Puts
By Chris Johnson and Jon Lewis

This market has been begging for puts as we’ve seen the May rally get zapped by June selling, but we want to keep a positive “American” spin for the Fourth of July recommendations, so how’s this �

The American auto producers have been on the rebound as they are getting back to making automobiles that our consumers are looking for, including hybrid and electric vehicles. Meanwhile, Toyota Motor Corporation (NYSE: TM) and Honda Motor Co., Ltd. (NYSE: HMC) have had their fair share of issues.

With the auto wars favoring the likes of GM and Ford Motor Company (NYSE: F) for now, we like the prospects for Toyota to continue its struggles as the American automakers continue to apply pressure.

Use the TM Aug 70 Puts (TM ���100821P00070000) to provide you with some profit potential as TM moves lower. This position will also provide a hedge against the market’s weakness, as TM has been a relative strength laggard lately.

Learn 7 Ways to Tell a Stock is Headed Down.

#8 Harley-Davidson Puts
By Michael Shulman

The Fourth of July is all about iconic American images. And it doesn’t get much more American than Harley-Davidson, Inc. (NYSE: HOG). Unfortunately for this American institution, business is bad, and HOG’s balance sheet is worse. The company cannot find a partner for the huge load of loans they hold, and the stock is so wildly overpriced you have to wonder if the people on Wall Street all own motorcycles.

Over time, HOG is a great fundamental short. Look at put options out as far out as you can go. This $22 stock is barely worth five bucks.

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