Option Investor
Newsletter

Daily Newsletter, Tuesday, 9/13/2011

Table of Contents

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

Market Wrap

No Bad News From Europe

by Jim Brown

Click here to email Jim Brown
Confusing comments from Europe today but at least nothing to crash the markets. Without a reason to sell the markets eased slightly higher.

Market Statistics

The markets squeezed out the first back to back gains in September thanks to calming words from Europe and positive comments from several corporate conferences. Italy appeared to move closer to getting its austerity program passed and it was able to sell some debt in the open market.

Greece continues to promise it will do whatever is necessary to meet the ECB/IMF guidelines. The talk appeared to calm nerves but nobody actually expects it to work.

Actually there was a lot more talk about an impending Greek default but the tone seemed to be assurances they were not going to let a Greek default crater the European Union. German chancellor Merkel sought to squash talk of a Greek default or an exit from the EU. She urged European officials to "weight their words carefully" to avoid creating further turmoil in the markets. She said in a radio interview the EU would do everything in its power and use all the tools at their disposal to prevent a Greek default because a "disorderly default" would lead to domino effects as other weak countries followed suit rather than tough it out.

It appears the level of severity is finally starting to be taken seriously. President Obama weigh in on the problem when he called for euro zone leaders to show the markets they were taking responsibility for the crisis. He warned that weakness in the global economy would persist until the problem was solved.

Treasury Secretary Geithner is making an unprecedented trip to attend the meeting of EU finance ministers in Poland on Friday in an effort to push for further decisive action and speed up changes to the bailout fund.

Europe's various officials have appeared to be in opposition to each other in the past on how to deal with the problems. With the crisis weighing on their banks, markets and economies it seems there is a sudden flurry of activity and a sharper focus on the problem. They are still not together on the solution but that could happen in the next couple weeks. Inside Germany the various officials and parties are not even on the same page so there is still a lot of work to be done. The fuse is burning on the Greek powder keg and they all know time is growing short.

There were new developments outside the EU. It was confirmed that China and Italy were in talks for China to invest in Italy. They already own about $100 billion or about 4% of the outstanding debt. Late Tuesday the Italian Economic Minister said the talks were not bonds but over potential investments inside Italy. China has offered verbal support of Greece in the past but so far there has not been any significant investment. Talk is cheap and serves as a way for China to insert itself into the EU affairs in an effort to broaden its economic reach and stature.

The bottom line, Greece did not self destruct today. Italy sold debt at a record high on Tuesday but at least they were able to sell it. A Brazilian official told Reuters the BRICS were in initial talks about increasing their holdings of euro-denominated bonds in an effort to help ease the crisis. The markets may not have cheered the minor points of progress but at least they did not crash.

On the U.S. economic front the Manpower Employment Survey showed the outlook for hiring was still positive although it had declined from the last reading. The outlook for Q4 was a 5, down from 12 in Q3. However, seasonally adjusted the Q4 number was a 7 compared to an 8 for Q3. Anything over zero represents expectations to add to payrolls and under zero indicates plans to cut positions.

The weekly chain store sales rose +1.3% compared to the -0.7% decline in the prior week. Analysts claim it was rebound sales from Irene and pent up demand left over from Labor Day. The ICSC is predicting sales for all of September to rise 4% to 5%.

Import prices declined by -0.4% in August and that was the second decline in the last three months. July rose +0.3% and June declined -0.7%. This suggests global inflation is moderating. Prices were rising from 2.6% to 3.0% per month back in Mar/Apr. Some of the decline was due to the drop in oil prices in August.

Lastly the Budget Deficit for August rose to -$134.2 billion. The government received $169.3 billion and spent $303.4 billion. Revenues were up +3% but spending rose +19% compared to August 2010. The deficit for this fiscal year which ends in September is now $1.305 trillion plus whatever deficit we have in September. That excludes Social Security and the Postal Service. The current deficit projection for 2012 is $1.2 trillion. That declines to $700 billion in 2013 assuming the payroll tax cut ends and the broader tax cuts extended in 2010 expire.

The reports for today were basically filler and none really attracted the attention of the market. For tomorrow the Producer Price index is the most important. On Thursday the Philly Fed and NY Empire Surveys are the highlight. All of these are leading up to the FOMC meeting next Tuesday, which will be the biggest event for the rest of the month.

Economic Calendar

This week is the start of the mid-quarter update cycle with several companies holding analyst meetings and updating guidance. Cummins Inc (CMI), a maker of diesel engines, said they expect 2011 to be a record year. The CEO said, "Despite the current uncertainty surrounding the economic growth of some global regions, 2011 will be a record year for Cummins. He said the demand for new trucks was strong and rising fuel prices was boosting demand for more fuel efficient engines. The CEO said Cummins expected year over year growth of 14% through 2015 with $30 billion in revenue in 2015. Thank you CMI for that breath of fresh air! CMI shares gained +6% on the news.

Cisco (CSCO) also held an analyst meeting where CEO John Chambers lowered revenue growth estimates slightly. Chambers said customers were either maintaining existing order levels or were increasing them slightly. Cisco lowered revenue growth targets from 12-17% to 5-7% but raised earnings growth rates to between 7% to 9% for the next three years. Cisco has been in the tank for several years and is finding competition very tough. However, after cutting 13,000 workers and slashing costs they are back in the competitive fight. Cisco expects 40% of its growth to come from emerging markets. Margins are expected to increase to 60-62% and that was better than analysts had projected. CSCO shares rose slightly on the news.

UPS is holding a two day analyst meeting on Wednesday and Thursday and their guidance could be critical to sustain this sudden upswing in sentiment. If UPS says business is good, not outstanding or improving but just good, then the positive sentiment could continue. There are plenty of analysts that believe UPS will spoil the party and cut its outlook after the weak August period. I asked my UPS driver this week how his loads had been and he said average. He said there was no big increase in packages but there had not been any decrease either.

I quiz him a lot because the UPS package traffic is a very valid indicator of economic activity. Analysts can theorize about sales at various retailers or numbers of truck engines but UPS package volumes are the common denominator for all retail sales. Consumers can buy stuff online from Amazon, Target, Harbor Freight, Neiman Marcus, Tiffany's and millions of other retailers. They range from the lowest price points to the highest but they all ship by UPS so package traffic is the number one metric for the economy at least in my book. Let's hope UPS does not stink up the place this week.

We have heard from several sources lately that August rail car loadings and truck shipments of goods had been good in August. Not strong but no slowdown as was expected.

Best Buy (BBY) shares declined -6% after reporting profits that declined -30% and revenue that missed estimates. The retailer said customers were "willing to trade service for price" and they were buying online, at discount stores and specialty chains. Best Buy should be reaping the benefits of being the largest electronics retailer since Circuit City shutdown but they are the victims of the economic slowdown and the proliferation of smaller niche retailers and the increasing reach of the discount stores.

Best Buy has lost the implied value in its name. It is no longer the best buy in electronics. For instance a hopper can buy the same 42 inch TV and a Blue Ray player at Costco for $650 that retails for $950 at Best Buy. You give up the vast selection at Costco but you gain significantly on price. This is the problem Best Buy related in their earnings call. Shoppers are willing to forego the service and variety to save on price. BBY said same store sales declined -2.8%. Earnings declined to 47-cents from 60-cents in the comparison quarter. Analyst estimates were 52-cents. They reaffirmed full year guidance at $51 billion and analysts were looking for $52 billion.

Intel and Google announced a new development partnership designed to accelerate Intel's entry into the Smartphone market. Intel will develop Atom processors to operate Android phones as a competitor to Microsoft's Windows phones. At the same time Microsoft and Qualcomm announced they were going to joint venture on Qualcomm's Snapdragon processor for the Window's 8 mobile hardware.

Microsoft also announced Windows 8 with a lengthy demo at the developers conference in Anaheim. Microsoft said it was giving away 5,000 tablets built by Samsung with the Window's 8 OS in an effort to generate a real buzz in the community. The tagline for Windows 8 is "Windows re-imagined" because it is supposed to be an entirely new release with major changes. Search is supposed to be integrated for both local and web content. Win-8 is more Cloud aware and it has a built in "App Store" similar to Apple's App Store in OS X Lion. Could Microsoft actually be coming back to life? Time will tell.

Amazon continues to power higher as additional secrets are revealed about its new website look and potentially a new shopping experience on the web and any mobile device. Amazon is expected to announce a tablet very soon that will be ready for shipment in Q4. Old news. However, the way it is redeveloping its website suggests a much stronger attack on mobile shoppers. One analyst thought it was going to be like the Home Shopping Network 24/7. With Amazon's new web design and product offerings you will be able to do anything from a tablet without ever leaving Amazon. You can read books, newspapers and magazines online. Watch live TV, movies and TV series. You can watch product videos before you buy and you can buy seamlessly from any device. One person familiar with the project said it should be called Amazon Everywhere. I just wish they would announce a stock split along with their tablet to put the stock price more in reach of the average investor. Long live options!

While on the topic of high dollar stock prices Apple (AAPL) may be about ready to do something with its cash hoard of nearly $100 billion by year end. Apple is generating $30-$40 billion in cash per year and there is nothing they can buy to consume all that cash. The analyst thought a special dividend was a growing possibility. Apple earnings could hit $50 a share in 2012. With the cash pile growing they will have to either issue a dividend, buyback stock or make acquisitions faster than Oracle to spend all that cash. None of that is conducive to a lower stock price so a stock split would be the only way to get the stock back to a reasonable level. Apple shares appear to be stuck in the $385 range thanks to the investor focus over Steve Jobs resignation.

Apple Chart

Stock funds saw outflows of $36 billion in August according to ICI. That was the largest outflow since late 2008. That means the herd left the building and a surprise rally leaves them on the sidelines watching the fun or chasing stock prices higher.

The Treasury Dept sold $21 billion in 10-year notes today at a record low yield of 2%. Demand was strong with a bid to cover at 3.03 compared to a normal BTC at 3.14.

With the Fed expected to introduce a new stimulus program at next Tuesday's FOMC meeting the outlook is for lower rates ahead. In theory the Fed will start buying farther out on the curve in the 5-10 year range to force longer term rates lower and force cash out of money markets and back into equities, real estate and businesses.

The S&P rallied +10 points on slightly less than average volume and it was the second consecutive gain. However, the pattern is still bearish with a lower low and a lower high. What we are seeing is a small oversold bounce from the touch of 1140 on Monday. Resistance remains 1175 as we approach the Philly Fed survey on Thursday and option expiration on Friday. Also, the Italian lower house of Parliament is set to vote on the austerity package on Wednesday. There are plenty of potholes in the road ahead and investors are not rushing to get long. They are nibbling at some longs ahead of the FOMC meeting but volume is only mediocre. The S&P needs to more over 1175 to attract attention and then over 1205 to break the curse. Initial support is 1140.

S&P Chart

The Dow was even more lackluster than the S&P. The rebound stalled at very light resistance at 11,100 and it is definitely a lower high and nowhere close to downtrend resistance. This is a bearish chart and the mediocre volume on the rebound is another negative sign. There are simply too many high profile events in the near future for cautious traders to load up on longs.

Dow Chart

The Nasdaq was the most bullish chart with numerous tech events to generate some positive tech sentiment. Cisco, Intel, Microsoft, Qualcomm, etc, were all making headlines and the chip sector benefitted. The SOX broke out to 366 and a five week high. Despite the bullishness the Nasdaq still has a lower high but unlike the Dow-SPX it did not make a lower low.

Nasdaq Chart

Semiconductor Index

Russell Chart

The most important even for Wednesday is the vote in the lower house of Parliament in Italy for the implementation of the austerity program. The upper house has already passed it.

We hear every day about a potential Greek default. That is no longer the real issue. They will probably default in some manner and the market will get over it. The real problem is Italy and Spain and avoiding a terminal problem in those countries. The vote on Wednesday is one key step in avoiding a Greek type event in Italy. The EFSF bailout fund is not nearly big enough to handle problems in Italy and Spain. This is another reason why the EU has to get its act together quickly to solve the smaller problem in Greece before the contagion spreads and one of the larger countries begins to head for the ICU.

I believe traders want to get long before next Tuesday's FOMC meeting but the various European events are holding them back. The charts are bearish, volume was mediocre and after two consecutive days in positive territory we are pressing our luck. The damage may have been done in August and that could limit any further selling but we need to at least hold over current support for the next week in order to build confidence that there is not a new low in our future.

Despite being oversold we were unable to generate a significant short covering rally today. That bothers me. I am neutral unless volume picks up and we move over initial resistance at 1175 on the S&P.

Jim Brown

Send Jim an email


New Option Plays

Processed Goods

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate, consider these stocks as possible trades:

ANF - Shares have rallied to resistance near the late August highs. A trigger near $66.50 could be used as a new bullish entry point. Look for additional resistance at the 100-dma.

APKT - The three-week trend of higher lows, the bullish engulfing candlestick yesterday, and today's close over $50.00 all look short-term bullish. I would be tempted to buy calls here but keep positions small. The larger trend is still down. Look for resistance near $57 and $60.

- James


NEW DIRECTIONAL CALL PLAYS

Mead Johnson Nutrition - MJN - close: 72.52 change: +1.17

Stop Loss: 68.75
Target(s): 77.00, 79.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
MJN has been showing relative strength and closed near all-time highs on Friday. If the market continues to rally then it could see a bullish breakout past resistance in the $72.80 area.

I am suggesting we use a trigger to launch bullish positions at $73.00. However, we do not want to open positions in MJN if the S&P 500 is negative at the time. If triggered at $73.00, we'll use a stop loss under Monday's low. Our targets are $77.00 and $79.50. The $75.00 level might offer some overhead resistance.

NOTE: The spreads on the Oct. $75 calls are a lot wider than the spreads on the $70s. Buying the $75s would be a riskier bet.

Trigger @ 73.00

- Suggested Positions -

buy the OCT $70 call (MJN1122J70) current ask $4.45

- or -

buy the OCT $75 call (MJN1122J75) current ask $2.34 (wider spreads)

Annotated Chart:

Entry on September xx at $ xx.xx
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on September 13, 2011



In Play Updates and Reviews

USO Hits Our Target

by James Brown

Click here to email James Brown

Editor's Note:

The widespread market strength and a bounce in oil prices lifted the USO to our exit target. Meanwhile PSMT, RRC, and the SINA trades were all opened today.

-James

Current Portfolio:


CALL Play Updates

Dollar Tree, Inc. - DLTR - close: 72.00 change: +0.21

Stop Loss: 68.95
Target(s): 76.00, 79.00
Current Option Gain/Loss: Sep$75: -90.0% & Oct$75: -29.7%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/13 update: DLTR underperformed the market on Tuesday with choppy sideways trading near the $72 level. Readers might want to inch their stop loss higher. No new positions today.

- 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


Ingersoll-Rand Plc. - IR - close: 33.22 change: +0.54

Stop Loss: 31.25
Target(s): 34.75, 36.75
Current Option Gain/Loss: Sep$33: -40.7% & Oct$35: -24.3%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/13 update: IR was an outperformer today with a +1.6% gain. Unfortunately the stock is still struggling with technical resistance at the descending 40-dma. I am not suggesting new positions tonight.

NOTE: We have three days left on our September calls. We need to exit soon.

- 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


PriceSmart Inc. - PSMT - close: 69.74 change: +1.93

Stop Loss: 64.65
Target(s): 74.00
Current Option Gain/Loss: + 8.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/13 update: Our new trade on PSMT is open. The stock opened at $68.08 and rallied to a new high near $70.00. The breakout over resistance at $68.00 is bullish. Our trigger to buy calls was hit at $68.25.

Earlier Comments:
It's possible the $70.00 level could be resistance but I'm setting our target at $74.00. The Point & Figure chart for PSMT is bullish with a $77 target.

- Suggested Positions -

Long OCT $70 call (PSMT1122J70) Entry $3.40

Entry on September 13 at $68.25
Earnings Date 11/10/11 (unconfirmed)
Average Daily Volume = 307 thousand
Listed on September 12, 2011


Range Resources Corp. - RRC - close: 63.37 change: +0.61

Stop Loss: 59.90
Target(s): 69.75, 72.50
Current Option Gain/Loss: Oct$65: - 2.8% & Oct$70: +10.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
09/13 update: Our RRC trade is now open. Shares opened at $63.12 and after a rocky morning finally ended the day up +0.9%. If you missed the entry point I would still consider new positions now. The next obstacle for bulls is resistance in the $66.50-67.00 zone. Conservative traders may want to take profits near $66.50 instead.

- Suggested Positions -

Long OCT $65 call (RRC1122J65) Entry $3.50

- or -

Long OCT $70 call (RRC1122J70) Entry $1.45

09/13 trade opened. RRC @ 63.12

Entry on September 13 at $63.12
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on September 8, 2011


Sina Corp. - SINA - close: 113.98 change: +7.25

Target(s): 124.00
Entry #1) Current Option Gain/Loss: + 8.7%
Stop Loss: 104.75
Entry #2) Current Option Gain/Loss: +25.0%
Stop Loss: 101.70
Time Frame: 4 to 6 weeks
New Positions: see trigger

Comments:
09/13 update: It was a big day for SINA. The stock opened higher and then soared past resistance near $110 and $112 to breakthrough multiple levels of resistance. A Bloomberg article today mentioned that SINA had "invited" some of its users to try an upgraded version of its "Weibo" service, similar to Twitter. Analysts see this as a move by SINA toward more social-network applications.

We had two different entry points. Both of them were triggered today. The plan was to keep our position size small.

Earlier Comments:
We do want to keep our position size small because SINA can be a volatile stock and we have a wide stop loss. I am setting our target at $124.00. More aggressive traders could aim higher. The inverse H&S pattern would suggest a target in the $150 area.

FYI: The Point & Figure chart for SINA has recently broken through resistance and is bullish with a $146 target.

Entry #1) Triggered @ 112.55, stop: 104.75 (SMALL positions!)

Long OCT $125 call (SINA1122J125) Entry $ 5.15

Entry #2) Entry @ 107.29, stop: 101.70 (SMALL positions!)

Long OCT $120 call (SINA1122J120) Entry $ 6.00

09/13 trade opened. both entry points hit.

Entry #1) Entry on September 13 at $112.55
Entry #2) Entry on September 13 at $107.29
Earnings Date 11/15/11 (unconfirmed)
Average Daily Volume = 6.0 million
Listed on September 8, 2011


SPDR S&P500 ETF - SPY - close: 117.74 change: +1.07

Stop Loss: 109.90
Target(s): 119.00, 122.00
Current Option Gain/Loss: Unopened
Time Frame: 4 weeks
New Positions: see below

Comments:
09/13 update: There is no change from my prior comments. Aggressive traders could buy this bounce with a tight stop under yesterday's low (114.05). The newsletter will stick to our original plan and wait for a drip toward Augusts' closing lows. Currently our trigger to buy calls is at $112.50.

Earlier Comments:
This trade is a bet that investors are willing to buy the dip near the August lows (ignoring the bearish H&S pattern) instead of selling stocks toward the August 2010 lows. We are suggesting readers use a trigger to buy calls on the SPY at $112.50 (just above the 1120 lows on the S&P500 index). More conservative traders could wait for a dip closer to the 1100 level on the index, which is $111.00 on the SPY.

If we are triggered at $112.50 on the SPY we'll use a stop loss at $109.90. Our upside targets are $119.00 and $122.00.

Buy-The-Dip Trigger @ $112.50

- Suggested Positions -

buy the OCT $118 call (SPY1122J118)

Entry on September xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 293 million
Listed on September 10, 2011


PUT Play Updates

Credit Suisse Group - CS - close: 23.28 change: +0.33

Stop Loss: n/a
Target(s): 19.00, 16.00
Current Option Gain/Loss: -20.0%
Time Frame: 4 to 10 weeks
New Positions: see below

Comments:
09/13 update: CS is still trying to stage an oversold bounce. The stock managed a +1.4% gain. Readers may want to wait for a failed rally near the $24.00 or $25.00 levels before launching new bearish positions.

Remember, this is a lottery ticket style of trade. European banks could see a lot of volatility on back and forth headlines regarding the fate of the PIIGS countries and their debt woes.

Earlier Comments:
The credit markets are telling investors that a Greek default is almost guaranteed but no one knows the actual date. It could be this month or it could be six months from now. Therefore, we need to label this CS put play as a speculative, aggressive bet. Greece and the EU do not want the country to default so CS could see a lot of volatility with sharp rebounds on positive headlines but these will be temporary.

With so much potential for volatility I am not listing a stop loss on this trade. Limit your risk by using small positions.

*Small Positions*

- Suggested Positions -

Long DEC $20 PUT (CS1117X20) Entry $2.00*

*09/12 option did not trade today but the $ASK did not move and remained at $2.00 (bid is $1.80)

Entry on September 12 at $22.48
Earnings Date --/--/-- (unconfirmed)
Average Daily Volume = 2.3 million
Listed on September 10, 2011


Moody's Corp. - MCO - close: 30.47 change: +0.97

Stop Loss: 30.85
Target(s): 26.50 , 25.25
Current Option Gain/Loss: Sep$30: -80.5% & Oct$27: -51.3%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/13 update: This could be it for our MCO trade. The stock is at a key turning point. Today's +3.2% gain and breakout over $30.00 is short-term bullish. Yet the stock stalled at the 30-dma, has not yet broken above its highs from last week, nor its multi-week trend of lower highs. That could all change tomorrow. A failure here would be a new entry point for puts. Any further gains and we'll probably see MCO hit our stop loss at $30.85.

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.

* Small Positions * - Suggested Positions -

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

- or -

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

09/10 new stop loss @ 30.85
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


Stanley Black & Decker - SWK - close: 54.94 change: +0.92

Stop Loss: 58.05
Target(s): 50.25, 46.00
Current Option Gain/Loss: Oct$50: -15.7%, & Oct$55: -15.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/13 update: Today's +1.7% gain in SWK has erased yesterday's loss. Yet the stock remains under what should be new overhead resistance at $56.00. Readers might want to wait and see if shares bounce to or roll over under $56.00 before initiating new positions.

Earlier Comments:
Conservative traders could use a stop closer to $56.50-56.00. Our first target is $50.25. The $50-49 area might be support. Yet I'm setting a secondary target at $46.00. FYI: SWK recently produced a new quadruple bottom breakdown sell signal on its Point & Figure chart, which currently points to a $46 target.

- Suggested Positions -

Long OCT $50 put (SWK1122V50) Entry $1.90

- or -

Long OCT $55 put (SWK1122V55) Entry $3.90

Entry on September 12 at $54.78
Earnings Date 10/18/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on September 10, 2011


CBOE Volatility Index - VIX - close: 36.91 change: - 1.68

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: -100.0%
Second Position Gain/Loss: -100.0%
Third Position Gain/Loss: -99.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
09/13 update: The VIX retreated -4.3% as stocks slowly worked their way higher. There is no change from my prior comments.

We have less than two weeks left before September VIX options expire on Wednesday, Sep. 21. 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


CLOSED BULLISH PLAYS

U.S. Oil Fund - USO - close: 34.85 change: +0.43

Stop Loss: 32.49
Target(s): $34.75,
Current Option Gain/Loss: +39.0%
Time Frame: 2 to 3 months
New Positions: see below

Comments:
09/13 update: Target achieved. USO rallied back toward resistance near $35.00. Our target was hit at $34.75.

- Suggested Positions -

NOV $34 call (USO1119K34) Entry $2.05, exit $2.85 (+39.0%)

09/13 exit target hit at $34.75
09/12 new stop loss @ 32.49
09/10 New exit target at $34.75
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

chart:

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