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LEAPS are longer-term options with expirations of between nine months and two and a half years.  Put LEAPS can be attractive as portfolio hedges because they lose time premium at a much slower rate than do shorter-term puts. In our screening, we looked for puts that are deemed to be underpriced, according to our model, that are based on stocks expected to do worse than the market over the next six to twelve months, and that offer leverage that is at least 2 to 1 on a downward move in the stock (i.e., if the stock falls 10%, the LEAP gains 20% or more).  We also specified a minimum bid/ask spread (15%) and a range of 5% to 35% out-of-the-money.  Our results came up with 19 puts on 8 different stocks, among them Carnival Corp (CCL) and NetApp Inc (NTAP).

Company

Ticker

Stock Price

Option Premium

"Fair Value"

% Out-of-Money

Downside Leverage*

Broadcom Corp

BRCM

35.20

4.05

5.35

-15%

28%

Carnival Corp

CCL

37.54

3.60

4.15

-20%

31%

Interoil Corporation

IOC

59.91

8.85

13.29

-17%

21%

NetApp Inc

NTAP

53.54

7.20

7.85

-7%

30%

Titanium Metals Corp

TIE

18.24

1.45

2.22

-31%

26%

* On a 10% Drop in the Stock

Broadcom Corporation (BRCM) develops integrated silicon solutions that enable commercial broadband digital data transmission to and within residences and businesses over new or existing (analog) communications infrastructures. The company designs and develops integrated circuits for use in cable-TV set-top boxes, cable modems, high-speed networks, direct satellite and land-based digital broadcast, cellular phones, personal navigation devices, Blue-ray Disk players and xDSL. www.broadcom.com.

Carnival Corporation & Carnival Plc (CCL) are among the largest vacation companies in the world with 11 brands: Carnival Cruise Lines, Princess Cruises, Holland America Line, Costa Cruises, P&O Cruises, Cunard Line, The Yachts of Seabourn, Ocean Village, AIDA, Ibero Cruises, and P&O Cruises Australia. These brands operate 98 ships with approximately 191,000 lower berths. The company also operates Holland America Princess Alaska Tours. www.carnivalcorp.com.

InterOil Corp. (IOC) engages in the exploration and production of oil and gas properties in Papua New Guinea. It also involves in the refining and liquefaction of jet fuel, diesel, and gasoline, as well as naphtha and low sulfur waxy residue. In addition, the company engages in the wholesale and retail distribution of diesel, jet fuel, gasoline, kerosene, and fuel oil, as well as branded commercial and industrial lubricants, such as engine and hydraulic oils. InterOil's assets consist of petroleum licenses covering about 3.9 million acres, an oil refinery, and retail and commercial distribution facilities, all located in Papua New Guinea. www.interoil.com 

NetApp, Inc. (NTAP), formerly Network Appliance, is a leading provider of systems, software, and services for storing, managing, protecting, and archiving business data. Products include Fabric-Attached Storage systems and V-Series storage solution based on Data ONTAP operating system and data protection, retention, and archive software. www.netapp.com.

Titanium Metals Corporation (TIE) engages in the production of titanium sponge, mill products, and industrial fabrications. The company sells its products through its sales force in the United States and Europe, as well as through independent agents internationally. It serves the commercial aerospace and military, oil and gas, automotive, and power generation industries. www.timet.com.

At the time of the writing of this report, the author had no positions in any of the stocks mentioned.