Option Trade on JOYG

OK, I admit it; I don’t read all of Barron’s every Saturday. Sometimes it takes me all week to make it through, but that isn’t such a bad thing. By the time I get around to trading on any of the picks the “Barron’s bounce” has come and gone and I’m sitting pretty. I finally read Vito Racanelli’s article on Joy Global (JOYG), a manufacturer and servicing company for mining equipment.
I’ve been looking for more low p/e companies lately since I’m getting nervous with this extended bull that’s been hanging around for a while. I love the bull’s company, but I don’t get why better than 4 out of 5 days we keep going up. I feel the need for a pull back, so until that happens I’m going to try to hang with the low p/e stocks. Schaeffer’s rates JOYG a flat 5 – nothing helpful there. Racanelli really does a good sales job on JOYG though. Low p/e, great cash flow, undeserved beating over the past year (down 1/3) and a glowing future. Throw in a Jim Cramer recommendation from 3/7/07 and I really had to give it some good thought, although it is up a good $6-7 since Cramer spoke.

Fundamentals are strong:
Trailing p/e = 14.55
Forward p/e = 13.76
PEG = 1.09

Ford Equity Research shows the p/e to be historically low for JOYG which gives some cushion if they don’t increase earnings as much as they’ve planned.
Chart looks strong with all four of the moving averages I watch sitting below the current price and rising. Since late March, the 10 day avg has provided support. If that continues, 48 could be as low as JOYG dips.

I starting writing this post last night and got distracted by my son who always takes priority. I threw in a limit for the June 50 put (JQYRJ) at 3.00, 0.20 above the ask at close. I really did it as a place holder so I’d be sure to give it some more thought this morning. At 10:08, with JOYG dipping down to 49.53, my limit hit and now I’m short 1 June 50 put. I received $289.25 after commissions and hope to make an annualized return of more than 73% if it isn’t exercised. Even if JOYG is assigned to me from my naked put, I like the stock and will hold on and keep writing covered calls on it like I’ve done with AAPL and NYX.