Option Investor
Newsletter

Daily Newsletter, Tuesday, 6/22/2010

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Fasten Your Seatbelts

by Jim Brown

Click here to email Jim Brown

Worries over a global double dip recession roared back into the picture on Tuesday and volatility quickly returned.

Market Stats Table

After a week off from worry over Europe the news came back to haunt us today. President Obama was rebuffed by German Chancellor Angela Merkel when he asked her to hold off on implementing austerity programs. She said no and embarked on the largest austerity program on record for Germany. The U.S. administration is concerned the current wave of austerity in Europe will push the global economy into a double dip recession. President Obama is not having a good week.

Japan said it was going to double its sales tax in an effort to pay down debt. China raised the requirements for buying a second home to 50% down payment. The U.K. raised its VAT by 2.5% and capital gains tax from 18% to 28%. With Europe and Asia rushing into debt reduction mode to avoid another debt crisis like we saw in Greece the odds are good we are going to see a double dip.

Our own economics appear to have rolled over and are heading down at an accelerating pace. We saw the Philly Fed Survey on Thursday drop to 8.0 from 21.4 for June. This was a major drop and put the index at the lowest level since August. The employment index turned negative for the first time since November.

Philly Fed Survey

Friday's Weekly Leading Index fell again for the sixth consecutive week and has declined for 10 of the last 11 weeks. The smoothed six-month growth rate is now projected at -5.7% from -3.7% just a week ago. This is the sharpest decline since the WLI began declining into the recession in 2007. The WLI is projecting a double dip.

Weekly Leading Index Chart

On Tuesday the Chain Store Sales declined for the second week with a -0.5% drop. The ICSC reported that customer traffic had fallen below last year's levels especially at department stores. Walgreens reported earnings on Tuesday and said same store sales had been slowing for the last two months. Walgreens is not a high dollar store and a slowdown in sales there should be an indicator of general consumer sentiment.

The Richmond Fed Manufacturing Survey for June fell by three points to 23 and the second monthly decline since the current cycle high at 30.0 in April. Backorders fell to three from 16 and new orders fell to 25 from 36.

Richmond Fed Chart

Existing home sales for May declined to 5.66 million annualized units. That was less than the 5.77 million pace in April and well below the consensus estimates for 6.15 million. The homebuyer tax credit appears to have had far less impact on the pace of sales than previously thought. The northeast region saw an -18% decline in sales to lead the nation. The west was the only area with a material increase at +4.9%. Listings declined by -4% leading to a minor drop in months of supply to 8.3 from 8.4.

This report does not count sales until they close and many tax credit deals are in jeopardy because buyers are having trouble closing. The banks are not moving fast enough on short sales and as many as 73% of homes contracted in April are still not closed. The Senate has passed an amendment to extend the closing date from June 30th to September 30th but the bill they attached it to is stuck in debate and is not expected to pass before the deadline.

The bill, the "American Jobs and Closing Tax Loopholes Act" has become a pork laden Christmas tree where every lawmaker hung their own ornaments of pet projects they wanted to pass. Now it has gotten so big they can't get enough votes to pass it in the present form. Even is the Senate does approve the bill it will have to go back to the House for another vote with all the pork attached. Odds are not good for a passage before the June 30th deadline but pork-laden bills almost always get passed eventually. Everybody wants to get their pet projects approved so they eventually vote for the bill despite the dozens of pet projects attached by everyone else.

Home sales will continue to decline as the summer progresses and so will home prices. Reportedly there are 5.5 million "sidelined sellers" waiting for the market to recover before they will list their homes. These sellers are expected to lose patience and begin listing next spring. This could double the number of homes on the market and further decrease prices.

On Wednesday the new home sales report for May will be released. The expectations are for a decline to 420,000 from 504,000.

The big economic event on Wednesday is the FOMC announcement at 2:15 PM. Absolutely nobody is expecting the Fed to make any changes. Bernanke is on record as saying there is no reason to raise rates in the months ahead and the sharp declines in recent economic reports confirm that belief. The odds are good the FOMC will keep the "exceptionally low…for an extended period" phrase for the eighth consecutive meeting. The key will be the Fed's outlook in the announcement. If they change the wording in some way to indicate the economy is slowing then the market could react negatively.

In the last announcement the FOMC said the "labor market is beginning to improve." That was an upgrade from the prior statement that the "labor market was stabilizing." With jobless claims rising, they were 472,000 last Thursday, and nonfarm payrolls expected to drop as much as -200,000 next week they will probably be forced to change that outlook. Obviously the FOMC statement tomorrow is full of potential minefields for the market.

After the bell today Adobe (ADBE) posted earnings of 28-cents. This was better than the 24-cents earned in the comparison quarter. Adjusted earnings were 44-cents compared to analyst estimates of 42-cents. Adobe guided inline with analyst estimates and shares declined slightly in afterhours to $30.85 before rebounding. Adobe said it would buyback $1.6 billion of its shares by November 2012.

Adobe Chart

We are about two weeks away from the start of the Q2 earnings cycle and worries are beginning to surface over guidance. The warning cycle was not particularly active although there were some notable events. However, analysts fear the guidance with earnings is going to slow dramatically as economic conditions weaken and Q3/Q4 comparisons become harder. The economy was rebounding in Q3/Q4 of 2009 and companies were lean, mean profit machines after having cut expenses to the bone. As the cycle progressed many companies added employees and relaxed their cost cutting in anticipation of a continued rebound. If sales are slowing again those increased expenses are going to be a drag on earnings. This earnings cycle may be a turning point for profits.

Banks are likely to guide lower because of the new financial reform package winding its way to passage. Barney Frank was pressing to get it passed this week so the president could take it to the G20 meeting next weekend. I don't know if Barney wanted president Obama to sit on the 1,000-page bill for additional height or to use it as a shield to deflect the barbed comments being thrown at him from other G20 members. On a side note, why does every new bill turn out longer than a Kevin Costner movie?

Analyst Richard Bove said the bill in its current form will be very bad for banks and he predicts it will be repealed or significantly modified within two years. Bove said the unintended costs will be massive and could cost the banks $200 billion. For instance PNC Financial will lose more than $150 million a year because of new limits on debit card overdrafts alone. The banks will eventually find other ways to pass the costs on to consumers but not in the first year. Other proposed laws will prevent banks from hedging against loan losses by purchasing swaps and other derivative instruments.

According to Bove lawmakers don't realize that banks barely breakeven on large corporate loans and they have to hedge the risk. Bove said this will raise costs for banks and force them to either quit lending or downsize loan limits significantly. This will force corporations to borrow from banks in Europe and Asia and boost the cost of credit and slow growth. Expect banks to guide lower if the financial reform bill passes.

As I said earlier president Obama is having a bad week. The German Chancellor rebuffed his request to delay the German austerity program. The president's budget director, Peter Orszag, announced today he was leaving in July. There was rampant speculation last weekend that Obama's Chief of Staff Rahm Emanuel would be leaving the team soon. Emanuel downplayed the rumors but their credibility is growing. There are also rumors that Council of Economic Advisers Chairman Christina Romer is also on the way out. White House Economic Advisor Larry Summers is also slipping from power after Tim Geithner and former Fed Chairman Paul Volcker gained stature on the Obama team over the last year.

Lastly a Federal judge blocked the president's six-month moratorium on drilling today. The case was brought by Hornbeck Offshore Services (HOS) but was joined by more than a dozen other companies in an attempt to get the moratorium cancelled. Many gulf coast officials like the governor of Louisiana also gave their support to the drillers in attempting to get the ban overturned. The judge issued a restraining order that at least temporarily cancelled the ban while the case was argued in the court. The judge challenged the immense scope of the moratorium. He said the firms would likely succeed in showing the moratorium was "arbitrary and capricious." The White House said they would immediately appear the restraining order in a higher court.

The Interior Department said despite the ruling the firms still had to meet new safety and environmental rules before they could resume operations. Louisiana's governor said the state stood to lose $3 billion in revenue over the life of the moratorium. He said the impact of the lost revenue would be worse than the impact of the oil spill. Reportedly the 35,000 direct workers related to the drilling halt earn $330 million a month in wages. The governor estimates that another 150,000 people on the coast depend on the oil industry for all or part of their income. It is estimated that the moratorium could cost the gulf states as much as $25 billion in lost commerce and wages. Secondly, every day of delay in bringing new wells online costs the states 32% of each barrel of oil that is delayed. That is the royalty portion received by the states. Pushing several hundred thousands of barrels of daily production out until 2011-2012 or even farther if the rigs move out of the gulf will cause revenue pain for the rest of the decade.

Over 19,000 deepwater wells have been drilled with only one major blowout. That is an excellent safety record. The one blowout was caused by a sequence of bad decisions by BP managers and not because of a problem with deepwater drilling as a business. The moratorium was a political statement made to appear in control of the disaster. Now there is so much water under the bridge defending that statement the administration can't back down or be seen as weak. It is a lose-lose situation for the administration, the gulf states and the drillers. The drillers rallied sharply on the news of the restraining order but crashed back to earth after the administration said it would appeal the ruling and ask for a stay in the order while the ruling was appealed.

There is a story just breaking this week that has not been truly explored yet. President Obama has pledged $2 billion as a loan to Petrobras to help them fund their deepwater drilling off the coast of Brazil. Petrobras is a government owned oil company but it does have shares that are traded on the NYSE under the symbol (PBR). The loan could grow to as much as $10 billion and will be made though the U.S. Export-Import Bank. Petrobras has made the largest oil discovery in the last 30 years in 10,000 feet of water a couple hundred miles off the coast of Brazil. They estimate it will cost them $300 billion to develop the find and they could be producing one-million barrels per day by 2020. The problem is the $300 billion development cost. They have been hitting up everyone in North and South America for loans to fund the development.

So why is the cash strapped U.S. agreeing to loan up to $10 billion to a government owned deepwater driller in South America? Bloomberg is reporting that George Soros, a major contributor to the democratic party, is a major investor in Petrobras with as much as $900 million invested and much of it just before the announcement about the U.S. loan. The Internet conspiracy theorists are digging for answers but so far it is just speculation. My question is simpler. Why is the U.S. funding drilling programs for other nations while it is throwing up roadblocks for U.S. drillers and threatening to raise taxes on oil? There has got to be more to this story and the Soros connection may have a bearing.

Where were you 35-years ago. Odds are good you were reconsidering your summer plans to visit a beach. This is the 35th anniversary of the movie Jaws. The movie grossed $470 million, a record at the time. Adjusted for inflation that would be $1.9 billion today. Even though it was just a movie people were scared to go into the water for the rest of the summer. Some are still afraid today. The movie put the term "Were gonna need a bigger boat" into the social lexicon where it will likely remain for decades to come.

Need a bigger boat clip

The market is going to need a bigger reason to move higher. The breakout has failed and the S&P closed back under the 200-day average and under 1100. This is not a good sign. The two-week rebound off the lows appears to be failing. The S&P spiked to 1131 on Monday and then plunged to close on the 200-day support at 1110. Tuesday's opening rally barely reached 1118 before falling back to rest on the 200-day until just before the close. Once that 200-day average was broken again the drop accelerated to close at 1095. That is a -36 point drop in the S&P from the Monday highs. This is not a bullish sign.

The market had been pricing in a double dip until a sudden flurry of good news about China's imports and Brazil's 9% GDP. That euphoria lasted about two weeks as analysts rethought their outlooks. After a week of questionable economic reports the verdict is in. The double dip possibility is back on the table and the markets are pricing in the risk.

The U.S. auctioned off $40 billion in two-year notes today. The yield was 0.73% and the lowest yield EVER seen in a two-year auction. The bid to cover was 3.45 and well over the 10 auction average of 3.01. After the auction the yield fell to close at 0.697%. This is a clear indication investors are worried about the future. How many people would want to tie up a lot of big money for two years for less than .75% in return? Evidently quite a few and that is troubling.

The S&P began weakening after the auction because institutional traders understand the implications of the debt sale. I know bonds and treasuries make most stock traders crazy because yields trade inversely with price and few stock traders understand the relationship between bonds, stocks and the market. However, some events like today's auction are so clear that the big money has to start taking defensive positions like raising cash.

I told everyone two weeks ago I believed the markets were going to try and make a breakout but I did not expect it to last. I confess I did expect it to last longer than a week but the return of the European worries and the return of economic concerns were too much for the market to bear. Add in a FOMC meeting and we have a perfect storm brewing. The best thing we could see this week would be a strong statement from the FOMC about the recovering economy. While I doubt that will happen it would help. Given the current economic conditions the Fed will probably try to craft the best statement possible without actually lying to us.

The S&P closed under multiple levels of support and has no technical reason for a Wednesday rebound. The rally is over technically and the fundamentals are not much help. With the close under 1100 I have reverted back to a bearish bias. Resistance is now 1100, 1110, 1120 and support is well below at 1050.

S&P-500 Chart

The Dow chart is not much better than the S&P. The resistance at 10500 held and the 200-day support failed. However, support at 10275 held at least for today. If that level fails we would retest the lows.

Dow Chart

The Nasdaq was positive for most of the day but collapsed with the chip stocks after lunch. The chips imploded knocking -10 points off the Semiconductor Index after noon. Apple was the only major gainer at +3.68 and only three other Nasdaq stocks gained more than a buck. Those were LNCR, HAYN and SQQQ. The second quarter is not normally good for tech earnings and summer tends to be choppy for the Nasdaq. There is no real reason to be buying techs today despite the great long-term prospects. The chip sector is expected to be very robust for the next two years but we still have to get past the summer doldrums. Next support is 2250 followed by 2225.

Nasdaq Chart

The Transports dropped nearly 4% today and -252 points since its high at 4514 on Monday. The possibility of a double dip is taking a toll on transport expectations.

Dow Transports Chart

As I said earlier I have reverted to a bearish bias with the S&P close under 1100. I am sure there will be volatility around the 2:15 Fed announcement but I doubt it will result in a lasting rally. The risks for the market are to the downside today.

We have gotten several emails over the last week about some SPAM emails a reader received claiming to be from Option Investor. You won a $500 prize or something similar. We did NOT send these emails and they did not go through our servers. This is a sophisticated Phishing attack that is moving through the Internet this week. I received several myself with different names. NEVER give out personal information in response to any unsolicited email you receive.

We do NOT advertise for anyone. We do NOT sell advertising on the website. There are no promotions for anything. We do NOT rent our email lists. Do not fall for these phishing attempts. At Option Investor your personal information is encrypted and cannot be stolen. The phishing attacks succeed because someone succeeds in writing a believable advertisement and the reader thinks it is legitimate. Please don't be fooled. If any email asks for personal information it is NOT from us. If you have any doubt please forward the email to support (at) optioninvestor.com.

Jim Brown


New Option Plays

This Long Play is Building Momentum

by Scott Hawes

Click here to email Scott Hawes


NEW DIRECTIONAL CALL PLAYS

Hanson Natural Corp - HANS - close 39.46 change -0.51 stop 38.25

Company Description:
Hansen Natural Corporation (Hansen) is a holding company. The Company, through its subsidiaries develops, markets, sells and distributes alternative beverage category natural sodas, fruit juices, juice blends, juice drinks, energy drinks and energy sports drinks, fruit juice smoothies and functional drinks, non-carbonated ready-to-drink iced teas, children’s multi-vitamin juice drinks, Junior Juice juices, Junior Juice Water and flavored sparkling beverages under the Hansen’s brand name. Hansen operates in two segments: Direct Store Delivery (DSD), whose principal products comprise primarily energy drinks, and Warehouse (Warehouse), whose principal products comprise primarily juice based and soda beverages. It develops, markets, sells and distributes energy drinks under the brand names, Monster Energy; Monster Hitman Energy Shooter and Lost Energy brand names, as well as Rumba, Samba and Tango brand energy juices.

Target(s): 40.95, 42.40, 43.25
Key Support/Resistance Areas: 42.50, 41.00, 40.25, 39.30, 38.50
Time Frame: 1 to 2 weeks

Why We Like It:
HANS got hit hard during the flash crash but has since held up well, making a series of higher lows. The stock is forming an ascending triangle on the daily chart and has an unfilled gap from the flash crash all the way up near $42.40. In addition, the stock is above its 20-day and 200-day SMA but has recently pulled back from its 50-day SMA. I suggest readers play for a bounce here with the building momentum of the ascending triangle. I also believe the S&P 500 will bounce as it is approaching the its 20-day SMA which should help stronger stocks that have performed. We have a good reference point to place a tight protective stop just below the 200-day SMA at $38.25, which also below the primary upward trend line. Our primary targets are $40.95 and $42.40.

Suggested Position: August $40.00 CALLS, current ask $2.35

Annotated Chart:

Entry on June xx
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on 6/22/10


In Play Updates and Reviews

Big Winner and Small Loser Closed

by Scott Hawes

Click here to email Scott Hawes

Editor's Note: Good Evening. The market followed through today from Monday's bearish engulfing candlestick and continued its decline from the 50% retracement level in the SPX. As a result we closed IGT for a nice gain and exited ESRX at the open per last night's play updates. NTAP is a big winner and I am suggesting we close this position tomorrow at the open, especially for readers who can not trade intraday. DTG also performed well today and now we await our trigger on CSCO (long) and our new long play in HANS.

The SPX is now approaching its 20-day SMA (1,190) from above for the first time since it broke through on 6/11. And I believe this back test may produce a bounce in stocks. The big question now is how high will the bounce go if in fact we do get a bounce? From a bullish perspective this would create a higher low on the daily chart so retesting the highs from Monday, which would also correspond with the 50-day SMA (currently at 1,135 and declining), is not out of the question. The bottom line is that price action will probably remain choppy in the coming days so I anticipate keeping the portfolio somewhat narrow until a direction is resolved. My macro view is more bearish than bullish but I have no problem initiating long positions on strong stocks in strong sectors if the conditions are favorable. If we do in fact get a bounce off of the 20-day SMA it will also give us the chance to initiate more short positions at better prices, and with tighter stops. Please email me with any questions.

Current Portfolio:


CALL Play Updates

Cisco Systems - CSCO - close 22.97 change -0.37 stop 22.20

Target(s): 23.65, 24.20
Key Support/Resistance Areas: 23.65, 22.55
Time Frame: 1 to 2 weeks

Comments:
I anticipate getting filled on CSCO tomorrow at $22.85. This level is just above the recent closing lows and I think this is a good entry to play for a bounce. My comments from the play release remain mostly the same except that I have changed the suggested option position to August $22.00 CALLS. CSCO remains in the base it has built for the past 3 to 4 weeks and is trading in a $1 range (4.5%) between $22.55 and $23.55. $22.50 is key pivot level for the stock dating back to 2006. CSCO looks stable here with a lot of support and I suggest we take advantage of the reliable price pattern that is being built. I would like to use $22.85 as a trigger to enter long positions. If triggered readers should be able to purchase August $22.00 calls for about $1.67 (current ask is $1.74). If CSCO then proceeds to rally to the top of its base at $23.65 we should make about 55 cents on the position for a +35% gain. If CSCO breaks out it could rally to fill a gap which is up near our more aggressive 2nd target of $24.20 and below the stock's 200-day SMA. Another entry could be considered at $23.05. Our stop will be $22.20. NOTE: I view this trade as potentially being quick once it is opened.

Suggested Position: Buy August $22.00 CALL if CSCO trades down near $22.85, current ask $1.74, estimated ask at entry $1.67

Annotated Chart:

Entry on June xx
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 69 million
Listed on 6/16/10


PUT Play Updates

Dollar Thrifty Auto Group - DTG - close 43.57 change -0.89 stop 45.90 *NEW*

Target(s): 43.15, 42.70, 41.65, 40.05, 39.35
Key Support/Resistance Areas: 45.50, 43.50, 41.50, 39.00,
Current Gain/Loss: +30%
Time Frame: 1 week
New Positions: Yes

Comments:
DTG opened at $44.56 which is where we initiated short positions. The stock closed down -2% on the day and our July $45.00 PUTS have already gained +30%. The stock closed below its 50-day SMA, however, $43.50 is a support area so DTG could bounce from here. Most likely, the stock would bounce up to its 50-day or 20-day SMA and then fail. However, if DTG breaks lower prior to bouncing I suggest readers begin to tighten stops and protect profits. I've listed $43.15 and $42.70 as additional targets. $42.70 would fill a gap from 4/27 to 4/28. I have also lowered the stop a bit to $45.90. We still need to get through the base of the descending triangle to get things moving lower in earnest. I urge readers to simply protect profits on this position and do not hesitate to take profits when the opportunity presents itself. I'll leave my comments from the play release. If DTG breaks support there is a gap to be filled all the way down to $39.35. The stock also has support at its 50-day SMA and a trend line began on 2/5, but I believe these will be broken on any further market weakness. So the question is whether or not to wait for the base of the triangle to break near $43.15 or initiate short positions at current levels. The stock made a double top with today's highs and the highs from 6/14 so it is a compelling area to initiate short positions at current levels. This also gives us a good reference point to place a relatively tight stop $46.40 which is above the double top and all of the highs since 6/4. More conservative traders may want to wait to initiate short positions if DTG trades below $43.15 as this should get things moving to the downside in earnest. Officially we will be entering short positions at current levels and playing the more aggressive route with a tight stop.

Current Position: July $45.00 PUTS, entry was at $1.65

Annotated weekly chart:

Entry on June 22, 2010
Earnings 8/19/2010 (unconfirmed)
Average Daily Volume: 9.1 million
Listed on June 19, 2010


NetApp, Inc. - NTAP - close 39.77 change -0.76 stop 41.05 *NEW*

Target(s): 39.70, 39.05, 37.00, 35.25
Key Support/Resistance Areas: 41.84, 40.00, 39.00, 36.50, 35.00
Current Gain/Loss: +70%
Time Frame: 1 week
New Positions: No

Comments:
We have made +70% on our NTAP position. As I mentioned yesterday I don't want to get too cute with this trade so fiercely protecting profits is highly suggested. The stock came within 18 cents of hitting our first target today. Today's low equals the low from 6/14 so if this gets interpreted as a double bottom by traders and the market bounces tomorrow NTAP could catch a serious bid. In addition, the 20-day SMA on the SPX is at 1,090 so even if we get a little more weakness tomorrow I expect stocks to bounce when the SPX reaches this level. For readers who do can not trade intraday I suggest you exit at the open tomorrow or place a GTC sell limit order based on the option price and simply take profits. For readers who can trade intraday I would be quick to exit positions if there is strength in the market tomorrow, and if there is weakness trail stops down. I've adjusted our stop down to $41.05 which should be enough room to absorb a bounce but I would not let the stock bounce this high prior to exiting. If the stock trades higher than this I it is time to step aside. I'm also going to adjust the first target to $39.70 which is just above today's lows. NTAP has corrected -5% from its highs which is in the range of our expected 5% to 10% decline when we initiated the play. So we need to stick with our set-ups and protect profits. NOTE: I view this trade as potentially being quick.

Current Position: July $41.00 PUTS, entry was at $1.30

Annotated Chart:

Entry on June 21, 2010
Earnings 8/19/2010 (unconfirmed)
Average Daily Volume: 9.1 million
Listed on June 19, 2010


CLOSED BULLISH PLAYS

Express Scripts, Inc - ESRX - close 50.20 change -1.51 stop 50.90

Target(s): 52.70 (hit), 53.25, 54.75
Key Support/Resistance Areas: 54.00, 51.25, 50.00
Current Gain/Loss: -7.84%
Time Frame: Several weeks
New Positions: Closed

Comments:
We made the right call with ESRX by selling positions at the open today at $2.35 for a small loss. The overall market weakness and news last Friday proved to be too much for ESRX. So we stayed nimble and exited positions to preserve capital. ESRX has now closed below its upward trend line from February and broke its 20-day and 50-day SMA's. The stock has support down to the $49.00 to $49.50 area which is also near its 100-day SMA. I would be careful underneath these levels with long positions as ESRX could pull back a couple of more dollars and maybe even make a trip to its 200-day SMA all the way down at $45.61.

Closed Position: August $52.50 CALL at $2.35, entry was at $2.55

Annotated Chart:

Entry on June 18, 2010
Earnings Date 7/29/10 (unconfirmed)
Average Daily Volume: 5.5 million
Listed on 6/17/10


CLOSED BEARISH PLAYS

International Game Technology - IGT - close 17.68 change -0.43 stop 19.10 *NEW*

Target(s): 17.80, 17.30, 16.80
Key Support/Resistance Areas: 19.00, 18.75, 18.09, 17.60, 17.25, 16.60
Current Gain/Loss: +57.9%
Time Frame: 1 week
New Positions: Closed

Comments:
IGT collapsed with the selling pressure today and hit our target of $17.80. Considering the sell-off in the markets since yesterday morning and that the SPX is approaching its 20-day SMA from above I think it is prudent to book this gain and not endure any bounces. We have made +57% on the trade and I believe taking the gain is the right thing to do. There is also support in the $17.60 area and $17.25 area so readers who still have positions, and who can manage them intraday, I suggest tightening stops as these levels approach. And please protect the profits we have earned.

Closed Position: July $19.00 PUTS @ $1.50, entry was at $0.95

Annotated Chart:

Entry on June 21, 2010
Earnings 7/22/2010 (unconfirmed)
Average Daily Volume: 4.8 million
Listed on June 19, 2010