Louisiana-Pacific Corp (LPX) Earnings Play 2/10/10

Louisiana-Pacific Corporation is engaged in the manufacturing of building products. During the year ended December 31, 2008, the Company owned 23 facilities located in the United States and Canada. The Company also owns two facilities in Chile and acquired a 75% ownership interest in the Brazilian facility. The Company also participates in the joint venture operation that produces cellulose insulation. The products of the Company are used in new home construction, repair and remodeling, and manufactured housing.

LPX reports earnings tomorrow morning before the market opens.  I have never traded the stock.  In fact, before today I didn't even know about it.  What I do know is lumber prices have been on a tear since Oct'09, yet this stock has underperformed.  This morning Goldman Sachs upgraded the stock from "Conviction Sell" to "Sell" (oh boy, what an upgrade!). 


Two things I'm looking at: 1) there is a beautiful converging triangle and the stock is about to break out on either direction (see the attached chart), and 2) monster amount of call option buyers are flocking in at Feb and March $7.50 strike calls.  


So, there is obviously interest developing that this is about to break out to the upside.  I stated in my profile that I never buy straight calls or puts.  But this might be just a small gamble I am willing to take.  THIS IS RISKY AND SPECULATIVE!!  I want to make sure my readers understand that, because converging triangles can easily break down.  If you feel like doing a small gamble, then buy March $7.50 calls going into earnings for no more than $0.40 debit.  A break above $8 will produce the measured target to $10 over time.  More conservative traders, just wait for a breakout above $8 and then move into call options.  


Keep position size small and good luck!