Novice Trade: BEN (original) (raw)

I prefer a bullish call shooter.

The Trade: buy 1 BEN July $45 call for a 1.00-point debit.

Franklin Resources (BEN) has traded over the past 52 weeks between 31 and 44 (rounded). BEN's current annual rate of return on its common dividend is 2%.

The company has an excellent balance, which shows that total cash exceeds total debt by about 9billion,orover9 billion, or over 9billion,orover16/share in net cash. At some point, price and time, fund managers should see BEN as a "cash cow" that offers them low risk and excellent reward.

BEN trades at a forward PE of 16. The company should finish this year with earnings near 2.90/share.Stripoutthat2.90/share. Strip out that 2.90/share.Stripoutthat16/share from BEN's current price of near 43+,andyouget43+, and you get 43+,andyouget27. Therefore, BEN's PE minus its net cash is only 9.3.

Technically, once again BEN is setting up for another upside breakout attempt. It has a stochastic and RSI pattern that I read as bullish. Very little resistance remains for BEN until the 50levelshouldthestockmovedover50 level should the stock moved over 50levelshouldthestockmovedover45 with buying momentum.

The trade tactic I prefer now for BEN is bullishly biased, out of the money, call shooter expiring in July.

The trade is as follows:

-- Buy 1 BEN July $45 call for a 1.00-point debit.

The suggested target to close for a gain is a bid of 1.50andthesuggestedstoplosstargetisabidof1.50 and the suggested stop loss target is a bid of 1.50andthesuggestedstoplosstargetisabidof0.50. Best to scale into the position using limit orders.

At the time of publication, Skip Raschke had no positions in the securities mentioned. Please be advised that doing options trades can entail increased risks and might not be suitable for all investors. Consult your financial adviser for details.