John Lansing

Don't Miss the Boat on These 3 Options Trades

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While dry bulk shipping may not be the sexiest topic on the planet, I have three options trades in this sector that should really get your engines revving.

So bear with me while I give you a little background.

The Baltic Dry Index

The Baltic Dry Index (BDI) tracks worldwide international shipping prices of various dry bulk cargoes.

Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The supply of cargo ships is generally both tight and inelastic -- it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in the Arizona desert. So marginal increases in demand can quickly push the index higher.

The index also indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, crude oil, metallic ores and grains.

With the index looking like it is going to head higher out of a bullish continuation pattern,  we want to look at the stocks that have the highest likelihood of breaking out along with the BDI, and some options trades that should double or triple your money.

See full-size chart.

A symmetrical triangle shows two converging trendlines -- one is ascending, the other is descending -- creating a sideways symmetrical triangle. The formation occurs because prices are making lower highs and higher lows.

Triangle patterns are usually susceptible to definite and dependable analysis, with the proviso that the investor must wait for a reliable, as opposed to a premature, breakout.

Volume is an important factor to consider when determining whether a formation is a true triangle. Typically, volume follows a reliable pattern: Volume should diminish as the price swings back and forth between an increasingly narrow range of highs and lows. However, when breakout occurs, there should be a noticeable increase in volume.

So, with that in mind, we have two shipping stocks with some option plays to take advantage of.