Honeywell (HON) is a diversified technology and manufacturing company that does business on a worldwide scale. HON continues to deliver earnings as well as excellent growth, in spite of these tough economic times.
HON is on track to produce 20% growth in earnings per share in the current quarter as well as 33% growth for fiscal 2011! Thus, fundamentally speaking, HON is about as well run a corporation as possible today.
HON is trading about $7 below its 2011 high of just over $62, that level made in early May. Trading at a price earnings multiple of 16 while growing its earnings at 20% or more offers a speculative opportunity in the options of HON should it continue on its retracement path of attempting to match or exceed that high set back in May.
Let's review the T3/OP video with Jill and Scott. Although they are not as bullish in the short term as I am, the thesis for the trade is in agreement with the collective analysis:
Consider a bullishly biased vertical call spread in HON, expiring in January. This trade is one with medium risk because the total risk is controlled. This trade has medium reward potential because of the fact that it is a hedged trade which caps the potential reward.
Trades: Buy to open 4 HON January 55 calls for $2.25 and sell to open 3 HON January 60 calls at $0.50.
The total risk for the spread is premium paid, or $1.75.