Skip to main content

Dykstra: Add Dow to the Option Mix

The chemical company's March calls offer a compelling brew.

Most traders are looking for a quarter-point cut in the benchmark federal funds rate on Tuesday. And with all of the recent weak economic data -- such as a decrease of 4,000 jobs in August and weaker-than-expected retail sales -- some are anticipating a half-point rate cut.

But another possibility, which would likely cause a huge selloff in the stock market, is that the


might not go through with a rate cut at all, if policy makers believe the economy is still growing moderately and that inflation remains a threat. Keeping Wall Street nervous about the financial sector Monday, regional bank

National City


said after-tax losses for its mortgage banking division will probably be close to $160 million in the third quarter, at the high end of its previously projected range. So that backdrop helps set the stage for the market today.

Dow Chemical

(DOW) - Get Free Report

is a diversified chemical company that offers a broad range of products and services to customers in more than 175 countries. Dow has annual sales of $49 billion and employs 43,000 people worldwide.

Last week,



and Dow subsidiary Dow AgroSciences announced plans to develop a product they call SmartStax, which will be the industry's first eight-gene stacked combination in corn, which is a corn seed more resistant to bugs and weeds.

The largest chemical company in the U.S., Dow is the very best at what it does. International sales contribute more than half of overall revenue making this a very solid recommendation. Furthermore, Dow has a very healthy balance sheet and reported over $50 billion in sales. Its

price-to-earnings ratio ratio chimes in at 11.96, and its return on equity is 20.20%, it holds $2 billion in cash and has a debt-to-equity ratio of .0541. Its stock is trading today at $42.23.

Today, I will put in a limit order to buy 10 March 35s (DOWCG), with a $35.00 strike price, so that I can purchase 10 contracts to control 1,000 shares of Dow common stock for $6.90 or better.

Game of Life

With 15 games or less remaining in the regular season, the NL East is suddenly in doubt, after the Phillies swept the Mets for the third time this season. After their eighth consecutive victory over the Mets, the Phillies find themselves only 3.5 games out of first place. In the NL Central, the Cubs hold a tenuous 1.5 game lead over the Brewers, with the defending World Series champion Cardinals all but dead, after losing 10 of their last 11 games. The NL West remains extremely competitive with the Diamondbacks on top, but the Padres and Dodgers both still capable of claiming the division title. The Rookies still have an outside chance for the wild card.

In the AL East, the Yankees took two out of three from the Red Sox to close to within 4.5 games of first place, riding Derek Jeter's clutch three-run homer in the eighth inning to victory. The Yankees lead the Tigers by 2.5 games for the wild-card berth, which is a far more realistic goal than a divisional championship. The Indians lead the AL Central by 4.5 games over the Tigers, who seem destined to battle the Yankees for the wild card spot. The Angels have sewed up the AL West, as the Mariners have faded dramatically in the past few weeks.

On the personal front, Todd Jones, the Tigers closer, registered his 300th save. Also, Jim Thome, the White Sox DH, and a genuine ambassador of the game, reached 500 career homers in style, hitting a walk-off to achieve the milestone.

The big news in the NFL this past week was that Bill Belichick was fined $500,000 and the Patriots will most likely forfeit a first-round drift pick for videotaping the New York Jets' defensive signals. In the games themselves, the Saints have started off 0-2, while the Colts are 2-0, after eking out a victory over the Titans. In the marquee Sunday night match-up, the Patriots, perhaps using the events of the past week as motivation, overwhelmed the San Diego Chargers, in a battle between two of the three preseason favorites to represent the AFC in the Super Bowl.

On the college gridiron, the USC Trojans substantiated their No. 1 ranking by routing the 14th-ranked Nebraska Cornhuskers, in Lincoln, Neb., on Saturday night. In contradistinction, the Fighting Irish of Notre Dame are 0-3, after being thoroughly dominated by the Michigan Wolverines, who claimed their first victory of the year. The 38-0 drubbing magnified Notre Dame's complete lack of an offense, thereby forcing Coach Charlie Weis to go back to the blackboard.

In another epic performance, the inimitable Tiger Woods playfully pawed the field at East Lake in Atlanta to claim victory in the inaugural FedEx Cup Tour Playoffs. With his eight-stroke victory, at 23 under par, Tiger now has $10,000,000 more in his retirement fund, the richest prize in sports history. Unequivocally, the greatest golfer on the planet left no doubt as to the magnitude of his prowess with his incredible performance.

On a down note, Greg Oden, whom the Portland Trailblazers made the No. 1 pick in the NBA draft, will be sidelined for the season after undergoing micro-fracture surgery on his knee. It is uncertain how Oden sustained the injury. Nevertheless, the loss of this 19-year-old phenom is a devastating blow to the Portland franchise.

The Players Club recognizes that marvelous athletes, possessing unique talents, can sometimes be inexplicably fragile. Hopefully, this will not be a case of déjà vu for the Trailblazers, who drafted another uniquely gifted big man, Sam Bowie, with the No. 2 pick in the 1984 NBA draft. Bowie 's talent was never realized, as his career was derailed by injuries. To add insult to injury, the No. 3 pick in 1984 NBA draft was a guy named Michael Jordan. By guaranteeing recurring cash flow, through our strategic partner, The Players Club endeavors to protect our members' financial future, regardless of where they were picked in the draft.

Always remember: Life is a journey. Enjoy the ride!

At the time of publication, Dykstra had no positions in stocks mentioned.

Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."