Option Investor
Newsletter

Daily Newsletter, Wednesday, 9/7/2011

Table of Contents

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

Market Wrap

Stocks Rally on Relief from Europe

by Keene Little

Click here to email Keene Little
Market Stats

Sorry for the lateness of tonight's report -- we had some technical difficulties this evening.

After recovering a good bit of yesterday's gap down, buyers felt braver about stepping back into the market. Being short-term oversold helped as some short covering got things going to the upside. It's one reason why those countries that are banning short covering just don't get it). The overseas markets recovered some from their selling on Monday and that gave U.S. equity futures a boost.

Asia rallied on news that China and India are considering easing their monetary policies in the near future. It is hoped by many that if these two potential giants ease up on their monetary tightening we could see greater demand from both of them. So there's nothing definite and it's all hope but that's what drives bull markets. It's only when those hopes are dashed that the bear comes back in with his slashing attacks.

The big win for the bulls was the news from Germany. Its high court ruled that the country's contributions to the bailouts of other European countries are constitutional, vindicated Angela Merkel. Had they voted the other way we could have seen a blood bath in the financial markets as interbank lending came to a screeching halt (which it was close to doing). However, the story doesn't finish with the high court's vote -- they said the government must seek the approval of the German parliament's budget committee before any further aid is rendered. Considering the anger from the German people, their legislature might not be in any mood to send out any more bailout money. Stay tuned.

Following the good start to the day, with a gap up (does the day start with anything other than a big gap these days?), the market simply chugged higher (albeit on lower volume) as bears continued their short covering. As resistance levels gave way there was more short covering and more buyers stepping back in. It was a nice steady climb all day and helped further by the Fed's Beige Book report that was released at 2:00 PM.

The Beige Book report, which is compiled from the views of the 12 Fed districts, shows an economy that is expanding at a "modest pace". Views ranged from "modest or slight expansion" from five banks to "somewhat weaker" in the Philly region. This report helps the Fed determine what their interest-rate decision should be in their upcoming meeting at the end of the month. No one expects a change in the interest rate but there's much speculation about the next step the Fed will take to help the economy. The bottom line from the report is that many of the Fed governors have lowered their expectations for the economy and that gives many traders hope that it will clear the way for Bernanke to ramp up liquidity (QE3 or otherwise) for the market. Hence the rally following the Beige Book report.

The rest of the afternoon, following the Beige Book, was a continuation of the steady climb we've seen since Tuesday morning's low. There was a little selloff in the last hour until the final 10 minutes when the market spiked back up into the close, closing near the highs of the day. It looked like an effort to punch a few more shorts out of the market. Closing at/near the highs sets the market up for a reversal back down tomorrow, probably starting with a gap down (wink). If the bulk of the buying is short covering, which the low volume says it probably is, and especially after the 2-day spurt to the upside off oversold, then there's a good chance there will be little follow through the following morning.

Following the sharp decline from the July high, which was on increasing volume, the bounce off the August 9th low has been on progressively lower volume. Today's rally was no exception to that, coming in about 60% less than yesterday's and one of the lightest days of the year (2nd lightest day since August 1st). It was even a little less than last Monday's, August 29th, which was also a gap up and big rally day. The following chart shows the increased volume in the decline and the declining volume in the bounce. The bear flag price pattern with the declining volume is a good indication that we should be looking for lower prices, not higher prices (although it's certainly possible we'll get another leg up within the flag pattern), but keeping in mind that low volume is not a guarantee of a rally failure. It gives us a heads up to be careful chasing the market higher.

S&P 500 ETF, SPY, Daily chart

Speaking of volume, it's very useful to check the volume pattern when evaluating another technical pattern, the H&S top. Looking back at the decline from this year's highs we can see a clear H&S topping pattern following the February high. Many traders did not want to acknowledge it while it was forming, especially since the last one in the first half of 2010 failed. It's part of our hopeful and optimistic nature, even as traders, and many still do not view it as a likely pattern (even though the downside objective out of it has been met). Show the same thing upside down (inverse H&S at a bottom) and most traders would jump all over it on the long side. But when it's a topping pattern we would prefer not to believe it. You'll know you're comfortable trading both sides when you see these bullish and bearish patterns and can trade them equally well.

Many bears were excited about the H&S topping pattern back in 2010 (February left shoulder, April head, and then the June right shoulder). Even CNBC reported on the pattern (which was our first clue it would not work). Price even broke the neckline near 1050 at the end of June. It turned out to be a head-fake break as July saw prices reverse hard and shoot higher from there.

One reason why the H&S top was not believed by many this year was because that same pattern in 2010 failed. But there was an important element missing in the 2010 H&S top that was present in the 2011 top -- the volume pattern. It's very important to see volume confirming a H&S pattern and what you need to see is volume declining once the left shoulder has completed. The volume was very nearly the same at each of the peaks in February, April and June 2010. The other missing piece was a volume surge on a break of the neckline. While the break in late June 2010 had a small volume increase on two days the decline was on essentially the same volume as previous days. So the volume did not confirm the H&S top and in fact the pattern failed (and failed patterns tend to fail hard).

But the this year's H&S topping pattern showed the requisite volume pattern as shown on the chart below. Following the building volume into the left shoulder in February the higher volume could be seen in the selling, not the buying. The May high and then the July highs were put in on lower volume. And once the neckline near the June low broke we saw volume spike considerably higher. This volume pattern helped confirm that the H&S top was the real deal.

S&P 500 ETF, SPY, Daily chart with H&S top

So the H&S topping pattern on the daily chart is a good example to keep in mind. Now how about the one on the weekly chart, shown below, that runs from the April 2010 high? I've set up the chart to look just like the daily chart above (with this year's H&S top still identified), noting the volume levels at the left shoulder (April 2010), head (May 2011) and then we'll have to see how the volume looks at the right shoulder, which I'm expecting to see with an end-of-year rally AFTER one more leg down for the current decline. I'll point out the expectation for one more leg down before the end-of-year rally, and why it's pointing to a low around 105, which would establish the neckline for the bounce into the right shoulder. If this pattern develops as I'm depicting, the downside objective is to SPY 68, which "coincidentally" is just above the March 2009 high at 67.10. Hmm, imagine that.

S&P 500 ETF, SPY, Weekly chart with H&S top

If we take this one step further and you look at the monthly chart with the highs in 2000 (left shoulder), 2007 head and 2011 (right shoulder), with the neckline across the 2002 and 2009 lows, it's a scary picture. The downside objective out of that H&S topping pattern is, well, let's not go there. Let's just say we'd probably have more things to worry about than the stock market at that point. Just take a peek at where the stock market was in 1994 to give you an idea what Might happen before the bear is done.

Now let's take a look at the regular charts to see what this market might be up to on a shorter-term basis. First, a quick review of the regular weekly chart now that you've seen the larger H&S topping pattern idea on the SPY chart above. For the move down from May it counts well on the weekly chart as needing a 5th wave down following the 4th wave bounce off the August low. That 5-wave move would complete a larger-degree 1st wave and set up the end-of-year rally as a 2nd wave correction, which typically retraces about 50% of the 1st wave. This pattern points to a low around 1050, perhaps finishing in September or early October, and then a rally back up to the 1225 area. It also points to a nasty time for bulls in the first half of 2012. You can see how the wave count fits a H&S topping pattern very nicely.

S&P 500, SPX, Weekly chart

A slight variation of the wave count calls for a steeper selloff following the current bounce off the August low. It points to a low near 950 before setting up a bigger bounce into the end of the year. The daily chart shows a parallel down-channel for the decline from May and July, the top of which stopped the rally last week, and the parallel up-channel for the bounce from the August 9th low (which fits as a bear flag because of the choppy price pattern with the overlapping highs and lows). The current bounce should stay below 1211 if last week's high completed the 3-wave correction to the decline. It's possible today completed the correction to the leg down from last week, to be followed now by a stronger selloff that breaks below 1100. But if SPX makes it above 1211 and holds above then look for a move up to the 1250 area before turning back down.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- Short term bullish above 1210
- bearish below 1136 and more bearish below 1090

The decline from last week looks impulsive, which means it should be the start of the next leg down for the larger decline. And that means the bounce off yesterday's low should be just a correction (albeit a sharp one), which might have finished at this afternoon's high, which is at the 38% retracement of the July-August decline (1198.93 and the high was 1198.62). It could get a little pop in the morning to close Friday's gap at 1203.96. If we see a choppy pullback following this 2-day rally it would indicate another leg up to the 1250-1260 area to complete a more complex corrective pattern within the bear flag. There's no indication yet that we've got something more bullish than that, and every indication that we should be viewing this bounce as a shorting opportunity. Following the next leg down is when we'll be looking for a very good buying opportunity for a multi-month rally into yearend (although it could be quite choppy and whippy).

S&P 500, SPX, 120-min chart

Because the pattern of the move down from May and July is not as clear as I'd like (especially since NDX made new highs in July) I have to consider a couple of alternate wave count ideas for the move down. The DOW's show the possibility that the July 21st high was the conclusion of its rally (as a truncated finish), it would mean the 1st wave down to the August low is now being followed by a 2nd wave correction. This points to a serious decline as the next move, one that could take the DOW down to well below 9000 in the next several weeks. But if it's similar to SPX where only a relatively minor new low is expected, then we'll have a good buying opportunity into the end of the year. So it will take some careful review of the strength of the decline (a 5th wave to a minor new low should be weaker than the previous decline) before trying to catch any falling knives. If we're first to get another new high for the bounce off the August low I'll be watching for a move up to the 11875 area.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 11,875
- bearish below 10,930

A little higher than NDX's high today it will run into potential trouble at the 50% retracement of the July-August decline, near 2237, and the broken uptrend line from March 2009-August 2010. If the bulls have a lot more buying in them we could see NDX pushed higher to the next level of resistance in the 2300 area (assuming it doesn't get stopped again by its 50-dma near 2265). If last week's high was the completion of its a-b-c bounce off the August 9th low we'll see it start back down and not make a new high above last week's.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 2265 and more bullish above 2320
- bearish below 2112

The RUT has the same picture as the others. It remains in a down-channel from July and a short-term up-channel from August. The top of the down-channel, which stopped its rally last week, is currently near 714. Today's rally stopped at the 62% retracement (709.34) of the decline from last week's high.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 734 and more bullish above 775
- bearish below 763

TNX tested its August 18th low yesterday (with a minor new low) with bullish divergence and a pullback in RSI to test its broken downtrend line. It looks good for a rally leg up to the 2.44% area to meet a Fib projection (2nd leg of the bounce off the August 18th low equal to 162% of the 1st leg) and the bottom of its previous down-channel, which it broken below in early August. But first it needs to break above 2.25% and there's still a chance for at least a minor new low before we'll see a bigger bounce.

10-year Yield, TNX, Daily chart

Germany's high court decision to back the bailouts of other European countries was met with a huge sigh of relief by banks around the world. Germany's legislature might not agree but that's for another day to worry about. The banking indexes were up nearly +6% today on short covering. But like the major indexes, today's rally could be just a correction to the decline from last week's high and will be followed by more selling that takes the banks to new lows for the year. If the banks can rally a few more days I'll be watching for potential resistance near 40.50 for BKX.

KBW Bank index, BKX, Daily chart

The TRAN continues to present a clean price pattern so I keep watching it for clues. So far it supports the idea that last week's high completed the correction to the July-August decline, in which case we could see stronger selling kick in soon. But another leg to its bounce could take the TRAN up to the 4900 area before it will be ready for another leg down.

Transportation Index, TRAN, Daily chart

The dollar looks like it's finally trying to get off the mat. The weekly chart below shows a bottoming pattern this year that looks very similar to the one in 2008. Out of that pattern the dollar shots higher into early 2009 so the same potential exists from here. I'm showing another leg down to the $70 area to do a better job at finishing a wave pattern for the decline from 2010 but much more of a rally from here would negate that expectation, especially with a rally above 76.75. Keep in mind that a strong dollar rally would likely put downward pressure on other assets as the dollar carry trade unwinds. The longer-term pattern for the dollar is looking for a rally up to close to $100 in 2012 but another leg down first could coincide with an end-of-year rally for the stock market.

U.S. Dollar contract, DX, Daily chart

Gold has had a couple of whippy weeks in the last few and I think it's part of a topping pattern. Tuesday's spike up to a minor new high was quickly followed by a selloff, leaving a bearish candlestick. It also left a very bearish divergence at the retest of the August 23rd high. I think there's a good chance we'll now see a strong selloff in gold, one that should take it down to the $1600 area, conceivable this month. If it tries one more time for a new high and leaves more bearish divergences it would be another excellent opportunity to try the short side on gold. I think we're at the start of what will be a multi-year correction to the price of gold.

Gold continuous contract, GC, Daily chart

Silver has been patiently waiting for gold to do its blow-off thing to the upside (silver having already done its thing back in April) and has formed a laborious, time consuming correction to its May decline. The sharp drop from the high on August 23rd followed by a 3-wave bounce to a lower high last Friday should be setting the stage for a more significant decline, one that should take it down to $20. As with gold there is the possibility for another push higher but I think the odds of that are less than seeing a strong decline right from here.

Silver continuous contract, SI, Daily chart

Oil continues to chop its way higher off the low on August 9th, just like the stock market. It could chop its way a little higher into next week and make it up to its downtrend line from May, near 92, but notice how it has respected the Fib retracements of its 2008 decline. And once it breaks a Fib level it then becomes resistance, as the 50% at 90.23 currently is. This may be all we'll see for oil's bounce.

Oil continuous contract, CL, Daily chart

The rest of the week is light on economic reports and there's nothing on deck that could goose the market (either way). The market might go into holding tomorrow in front of Obama's job speech tomorrow night but I don't see the market really caring one way or the other. It's going to be a political speech with no money (which comes from Congress) behind it.

Economic reports, summary and Key Trading Levels

The selloff from August 31st into yesterday morning's gap down had the market oversold and when there was no follow through to the gap down the shorts starting getting nervous. When Germany's high court approved of Germany's participation in the bailouts of other countries the shorts were further disappointed and covered some more. But the volume for the bounce off the August 9th low has been shrinking and today's volume was pathetic. The rally can certainly continue on low volume but it's a warning that the rally is likely a correction to the decline (more from short covering than real buying) instead of the start of a stronger bull leg up.

Based on the price pattern, supported with low volume, I am looking at the bounce as a correction to be shorted. The current recommendation is to be short against last week's highs. If those highs are exceeded then I'll be shorting the next high when it rolls over, with a stop at a new high. It might take a couple of stabs but the trip back down will more than cover the costs of being stopped out for relatively small amounts. If you're playing the long side I suggest trailing your stops up tight. Keep in mind that long plays are now counter-trend plays and therefore little base hits is all you should expect. Short plays should have a little more staying power once it rolls back over. The hard part with short plays is the tendency for the market to bounce back up in sharp spikes, like this week.

Good luck and I'll be back with you next Wednesday.

Key Levels for SPX:
- Short term bullish above 1210
- bearish below 1136 and more bearish below 1090

Key Levels for DOW:
- bullish above 11,875
- bearish below 10,930

Key Levels for NDX:
- bullish above 2265 and more bullish above 2320
- bearish below 2112

Key Levels for RUT:
- bullish above 734 and more bullish above 775
- bearish below 763

Keene H. Little, CMT


New Option Plays

S&P 500 Up +5% from Tuesday's Low

by James Brown

Click here to email James Brown

Editor's Note:

If you discount the first hour of trading on Tuesday (yesterday) then the market has produced a pretty big bounce. The S&P 500 index is up +5% from its Tuesday morning lows near 1,140. The NASDAQ is up +5.5% and the small cap Russell 2000 is up +6.9% in the same time period off their Tuesday morning lows. While we remain short-term bullish on stocks that does not mean we want to chase a move like that - at least not with the S&P 500 closing right on psychological resistance at the 1200 level.

There is no guarantee the rally continues tomorrow since stocks might churn sideways as investors wait to hear President Obama's speech on creating new jobs tomorrow night (Thursday).

Most traders are familiar with a head-and-shoulders pattern, which is essentially a triple-top pattern that is supposed to forecast future declines. The opposite is the inverse head-and-shoulders pattern, which is bullish. The good news here is that I'm seeing more and more inverse H&S patterns. The signal is not active until the stock/ETF/or index breaks through the neckline, which has not happened yet for most of the patterns I'm seeing so far.

I find the growing number of inverse H&S patterns to be a bullish market development. However, I have to warn you that I am still seeing a lot of bear-flag type of patterns. These are a bit more tricky since they have a bullish pattern of higher lows and higher highs but they're just a consolidation before the prior downtrend resumes.

We are not adding any new trades tonight but I'm listing some stocks that caught my eye today.

Inverse head-and-shoulders pattern: FFIV, QCOM, PCAR, ALTR, IBM, HON

ORLY is breaking out to new highs. Broken resistance near $66 could be support. Wait for a dip.

WFM is nearing resistance in the $68 area. A breakout could be a new entry point.

LIFE looks tempting here but you may want to wait for a dip or a new bounce near $40.

Aggressive traders may want to look at Goldman Sachs (GS) . The stock might be forming a bullish double bottom but it's a little early to tell. I'm very cautious on the financials since the ups and downs are so volatile for this group. Traders willing to handle a higher-risk trade could buy calls on GS now with a stop under yesterday's low.

- James


In Play Updates and Reviews

The Rebound Continues

by James Brown

Click here to email James Brown

Editor's Note:

The intraday bounce that began on Tuesday continues. The S&P 500 surged +2.8% to settle near overhead resistance at 1200.

All of our "new" bullish trades are open.

-James

Current Portfolio:


CALL Play Updates

Cabot Oil & Gas - COG - close: 77.12 change: +2.02

Stop Loss: 69.90
Target(s): 82.00, 84.75
Current Option Gain/Loss: Oct.$80: - 8.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/07 update: Our expectation that COG would continue higher today was correct. Unfortunately the stock gapped open higher at $76.72. Our new trade is open but the entry point puts us at a disadvantage. COG stalled at resistance near its recent highs, which isn't too surprising. If you're still looking for an entry point a dip near the $75.50-74.50 zone could work. Otherwise you may want to wait for COG to close over resistance in the $78.50 area. Our targets are $82.00 and $84.75.

- Suggested Positions -

Long OCT $80 call (COG1122J80) Entry $4.50

09/07 trade opened. COG gapped open higher at $76.72
09/06 original trade stopped out. Try again tomorrow with new stop and targets

Entry on September 7 at $76.72
Earnings Date 10/25/11 (unconfirmed)
Average Daily Volume = 2.1 million
Listed on September 6, 2011


Dollar Tree, Inc. - DLTR - close: 71.99 change: -0.19

Stop Loss: 68.95
Target(s): 76.00, 79.00
Current Option Gain/Loss: Sep$75: -10.0% & Oct$75: -10.6%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/07 update: Hmm... that's an interesting. DLTR opened higher but the rally stalled and shares underperformed today with a -0.2% decline. It could have been traders moving away from defensive names and putting money into riskier sectors. I didn't see any news to explain the relative weakness today. The overall trend is still bullish. The strength this morning did open our trade but readers may want to wait for a dip near $70.00 before initiating new positions.

- Suggested Positions -

Long SEP $75 call (DLTR1117I75) Entry $0.50

- or -

Long OCT $75 call (DLTR1122J75) Entry $2.35

09/07 trade is open. DLTR gapped open at $72.97
09/06 trade not open. Adjusted entry point strategy, stop loss, and targets.

Entry on September 7 at $72.97
Earnings Date 11/17/11 (unconfirmed)
Average Daily Volume = 2.2 million
Listed on September 3, 2011


Energy XXI Ltd. - EXXI - close: 25.78 change: +0.70

Stop Loss: 23.49
Target(s): 27.90, 29.75
Current Option Gain/Loss: Oct$27: - 8.1% & Dec$30: - 2.7%
Time Frame: 6 to 12 weeks
New Positions: see below

Comments:
09/07 update: The market's strength this morning and EXXI's gap open higher has reopened our trade. Shares opened at $25.67 and rallied to $26.45 before trimming its gains to settle up +2.7%.

Readers may want to keep their position size small because EXXI can be a volatile stock! Plus, I want to point out that technically EXXI is in a neutral trading pattern of higher lows and lower highs (pennant formation).

- Suggested Positions -

Long OCT $27 call (EXXI1122J27) Entry $1.85*

- or -

Long DEC $30 call (EXXI1117L30) Entry $1.85*

09/07 trade open. EXXI opened at $25.67
*prices are estimates. options did not trade today
09/06 original trade stopped out. Try again tomorrow with new stop and targets

Entry on September 7 at $25.67
Earnings Date 10/25/11 (unconfirmed)
Average Daily Volume = 1.4 million
Listed on September 6, 2011


Ingersoll-Rand Plc. - IR - close: 34.46 change: +1.61

Stop Loss: 31.25
Target(s): 34.75, 36.75
Current Option Gain/Loss: Sep$33: +37.0% & Oct$35: + 0.0%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/07 update: Our trade on IR is open. Shares gapped higher at $33.39 and soared to a +4.9% gain and a new four-week high. I probably would not chase it now. Wait for a dip before considering new positions.

- Suggested Positions -

Long SEP $33 call (IR1117I33) Entry $1.35*

- or -

Long OCT $35 call (IR1122J35) Entry $1.85

09/07 trade opened. IR gapped higher at $33.39
*price is an estimate. option did not trade today
09/06 play not open. try again. new stop loss $31.25

Entry on September 7 at $33.39
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 8.0 million
Listed on September 3, 2011


U.S. Oil Fund - USO - close: 34.69 change: +1.10

Stop Loss: 31.90
Target(s): $37.50, 40.00
Current Option Gain/Loss: +37.5%
Time Frame: 2 to 3 months
New Positions: see below

Comments:
09/07 update: Oil prices rallied and the USO delivered a +3.2% gain. This ETF is nearing prior resistance in the $35 area. Don't be surprised to see a pull back soon. I would not chase it here.

Earlier Comments:
Keep your position size small! This is a lottery-ticket style of play.

- Suggested Positions -

Long NOV $34 call (USO1119K34) Entry $2.05

08/27 new stop loss @ $31.90
08/27 removing 2nd trigger to add another position.
08/20 Adding a new buy-the-dip entry at $30.50, stop @ 29.00

Entry on August 9 at $31.97
Earnings Date --/--/--
Average Daily Volume = 10.7 million
Listed on August 8, 2011


PUT Play Updates

Moody's Corp. - MCO - close: 30.27 change: +1.22

Stop Loss: 31.60
Target(s): 26.50 , 25.25
Current Option Gain/Loss: Sep$30: -61.5% & Oct$27: -46.6%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/07 update: The combination of the gap down entry point on Tuesday and now this big two-day rebound in stocks has turned this play against us pretty quickly. The close over $30.00 is short-term bullish even though the larger trend is down. More conservative traders may want to consider an early exit now. I am not suggesting new positions at this time.

Earlier Comments:
FYI: There are plenty of investors who are bearish on MCO. The most recent data listed short interest at almost 15% of the 183 million-share float. That does raise the risk of a short squeeze. We want to keep our position size small.

The Point & Figure chart for MCO is bearish with a $19 target.

We will list both September and October calls but bear in mind that Septembers will expire in less than two weeks. I prefer the Octobers!

* Small Positions * - Suggested Positions -

Long SEP $30 PUT (MCO1117U30) Entry $2.00*

- or -

Long OCT $27 PUT (MCO1122V27) Entry $1.80*

09/06 *Entry price on these options are estimates. Options did not trade today.

Entry on September 06 at $28.06
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 4.5 million
Listed on September 3, 2011


CBOE Volatility Index - VIX - close: 33.38 change: - 3.62

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: -98.7%
Second Position Gain/Loss: - 98.0%
Third Position Gain/Loss: -86.8%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
09/07 update: The stock market's big surge today took a chunk out of the VIX (-9.7%) but it remains well above the 30 level.

We are not suggesting new positions at this time.

Earlier Comments:
I am not listing a stop loss on this trade. We should consider this a higher-risk, speculative trade. I'm setting our targets at 26.00 and 22.50.

NOTE: These VIX options expire on Wednesday, September 21st.

- Suggested Positions -

Long SEP $25.00 PUT (VIX1121U25) Entry $4.00

- Second Position, entered at the open on Monday, Aug. 8th -
(very small positions)

Long SEP $25.00 PUT (VIX1121U25) Entry $2.50

- 3rd Position, listed Aug. 8th, Open Aug. 9th @ open. -

Long SEP $30.00 PUT (VXI1121U30) Entry $5.70

08/17 August VIX options expire
1st position Aug. $25 put @ $0.00 (-100%)
2nd position Aug. $25 put @ $0.00 (-100%)
08/08 3rd position listed to buy at the open on Aug. 9th
08/08 2nd position was filled the open.

Entry on August 5 at $28.48
Earnings Date --/--/--
Average Daily Volume = ---
Listed on August 4, 2011