11/4/2013 MON

United Technologies       NYSE: UTX                 Friday close 107.51

“When a select group of speculative stocks trading at huge multiples of their earnings—due to high expectations for future earnings—leads the market, it can be harder to sustain the gains than in a bull market led by companies with more-dependable earnings”. http://online.wsj.com

      UTX closed at 107.51 consolidating in the 106 to 108 range over the past two weeks or so. Again the stock has been one of the leaders in the Dow Jones Transports and is trading at a slightly high P/E ratio of 19.5 times earnings. It reported earnings of 1.55 for the 3^rd Qtr of 2013, beating the consensus of 1.53, revenues increased slightly up 3% and new orders increased by 4%, all less than stellar.

      Time and low volatility on a stock that has had a roughly 300% increase present an interesting opportunity on one of the Transport’s top performers continues to present an affordable bearish play. With the stock trading at or above 107 look to buy the Jan 105/92.5 put vertical for 1.75 or better. A break below the 106 range should see the stock trade into the 105 – 100 levels which is only a 5-7% drop from where the shares are trading at currently.

Risk $175/Reward $1,095

IV 20%

Average Volume 2,900,000

Open Int. (est.)    strike                 JAN 13 Monthly (74)

85                                          2,100

87.5                                       1,760

90                                          4,465

92.5                                       3,000

95                                          3,050

97.5                                       1,700

100                                        7,400

105                                        8,560

110                                        6,465

*Disclaimer: This is not a recommendation. All trading entails risk. Anyone employing any strategies and having limited knowledge of options trading should consult with a FINRA licensed professional.