JWN Nordstrom Idea

Nordstrom has been doing very well lately and should continue to rise.

Nordstrom closed Friday at 46.15.  We have prior resistance at 44 which is now support.  It could run up to 50 if earnings go well.

Stock-Chart---JWN-2011-02-13

One thing we can try to do is a long call vertical.

Buy March 46 Call 1.96 Debit
Sell March 49 Call .76 Credit

Total cost is 1.15

Since previous support is 44 we could also sell a Put below it.  We will go with the March 43 which is about 7% lower than the current price.

Sell  March 43 PUT .86

Total Cost is now .27
On one contract we will pay $27 for the opportunity to make $270 which is 10x our pay out.

The downside is that we may have to buy the stock at 43 no matter how far it falls, but Nordstrom isn’t going to zero tomorrow.  If we get an option assignment then we can start selling covered calls to make some revenue from the trade.

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