What a great way to start options trading activities in a new week. The S&P 500 (SPX) crossed the 2000 mark for the first time ever when it touched 2001.95 this morning. The general feeling in the market attests to the wisdom behind making bullish options plays; hence, we start this week on a bullish note as we explore options of United Technologies Corporation (NYSE:UTX). United Technologies Corporation with its market capitalization of $100.67B provides high technology products and services to the building systems and aerospace industries worldwide.
Why A Bullish Play in UTX Options is Smart
The U.S stock market is bullishly forging ahead, stocks are making new highs and the S&P 500 has crossed the 2000 milestone; yet, we cannot wish away the fact that we are in a maturing bull market. I strongly believe in riding this bullish wave all the way to the very top and I think it might not be smart to shortchange yourself by selling short now.
However, it is smart to buy calls of companies that are best poised to continue to deliver growth, reward shareholders and encourage increased buying action in their shares irrespective of what happens in the market. United Technologies is one of such strategically positioned companies.
To start with, United Technologies is an industrial conglomerate that manufactures products that will always be in demand irrespective of what happens in the market. The company’s five reporting segments all manufacture products that are in demand when the market goes up, down or sideways.
Its Otis elevators category, which was responsible for about 20% of 2013 revenue, is the largest manufacturer of elevators and escalators in the world. The company’s UTC Climate, Controls & Security segment (27% of 2013 revenue) is a leading global supplier of HVAC solutions including the Carrier brand. Its Sikorsky segment (9% of 2013 revenue) is largest manufacturer of military and commercial helicopters in the world. Its Pratt & Whitney segment (23% of 2013 revenue) is one of the top manufacturers of aircraft engines in the world.
You will be optimistic about trading UTX calls considering the quality of its second quarter (Q2 2014) earnings released about a month ago with growth in the top and bottom lines. The highlights of second quarter results are presented below:
The company reported net income of $1.68B or $1.84 per share, up 8% from $1.56B or $1.70 per share from the same quarter last year (up 12% ex. restructuring and one-time items)
Total revenue increased by 7% year-over-year to $17.19B (including 3% organic growth) to beat consensus analysts’ estimate of $16.6B.
The company increased lower end of 2014 EPS range, as it now expects EPS of $6.75 to $6.85. The company also expects the 2014 cash flow from operations less Capex in the range of 90-100% of net income
United Technologies also plans to reward shareholders as it works toward share repurchase of $1.25B in fiscal 2014.
How to Trade UTX Options
I am bullish on United Technologies Corporation and I strongly believe that the stock is a “Strong Buy” candidate if you want to ride this bullish wave all the way to the peak. I have a $120 price target on the stock in the next six months in line with its 52-week high of $120.66 and I recommend buying the UTX Jan 2015 115.000 call (UTX150117C00115000) at an asking price of $2.05. The contract is up some 10.81% in today’s trading and I believe that we can expect at least 50% profit in the next 8 weeks.
— Daily Option Alerts