Chattem (CHTT) Could Heal the Ache

Barron’s August 27, 2007 issue had a bullish write up on Chattem (CHTT).  It got the typical Monday bounce from the article, but is down today back to where it closed on Friday.  Michael Santoli makes a good case for CHTT long term.  Chattem makes some of the household products we’re all familiar with, even if we don’t use them, such as Icy Hot and Selsun Blue.  I could see more people moving to these “safer” investments in household items that tend to be more recession proof as this market continues its slide.

The premiums are fairly high which gives me the opportunity to sell farther out-of-the-money (OTM).  CHTT is trading at 60.11 as I write this and the chart shows that 55 could be a good support level as it bounced off of that area twice recently.  Today’s price action has sandwiched CHTT between the 50 day and 20 day moving averages.  If the 20 day holds, CHTT could return to its accent.

Barron’s reported that Charles Kantor from Newberger Berman believes CHTT could hit 80 in the next 12-18 months.  That gives me a fat cushion if I’m only worried about staying even or even down no more than $5 in the next two months.

I sold two October 55 naked puts (HQTVK) and received $308.50 after commissions.  The ITM covered calls at 55 could be a nice play too for those who prefer to own the equity when selling options.

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