Trading The Breakout In Honeywell With Options (HON)

Notes: On April 17th, the $83B industrial conglomerate reported Q1 EPS of $1.41 vs the Wall Street consensus estimate of $1.39 on revenue of $9.21B vs the $9.50B estimate (down 4.8% year over year). Margins ticked up 220 basis points to 18.7% in one year’s time. The company has a nice dividend just under 2%, but CEO David Cote has said that they plan on spending $10B on mergers & acquisitions by 2018 (M&A has slowed for them lately). With nearly $9B in cash and short-term investments I would suspect that we’ll see a couple of deals later this year (overall M&A market has been hot). HON trades at a P/E ratio of 17.48x (2015 estimates), price to sales ratio of 2.05x, and a price to book ratio of 4.65x. On April 28th, Oppenheimer reiterated their outperform rating and a $117 price target.

Honeywell International (HON) Options Trade Ideas

Buy the (HON) June $105/$110 bull call spread for a $2.05 debit or better

(Buy the June $105 call and sell the June $110 call, all in one trade)

Stop loss- None

1st upside target- $4.00

2nd upside target- $4.95

Or

Buy the (HON) June $105/$110/$115 call butterfly for a $1.65 debit or better

(Buy 1 June $105 call, sell 2 June $110 calls, buy 1 June $115 call, all in one trade)

Stop loss- None

1st upside target- $3.30 or a move to $110 in the stock

2nd upside target- $4.90

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HON