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NEW DIRECTIONAL PUT PLAYS

Costco - COST - close: 48.94 change: -0.49 stop: 52.55

Why We Like It:
The trend in COST looks very bearish and the recent breakdown under $50.00 looked like an entry point for puts. However, we don't want to open positions just yet. The DJIA and S&P 500 both tested support and both look short-term oversold. I suspect the market will see a short-term rebound and COST will be lifted with it. That's when we want to buy puts.

The plan is to buy puts on COST when shares hit the $50.40-51.50 zone. Start with a stop loss at $52.55. If triggered our target is $45.75. FYI: The Point & Figure chart is bearish with a $42 target.

Suggested Options:
We are suggesting the February puts. Entry point is $50.40.

BUY PUT FEB 52.50 PRQ-NX open interest= 646 current ask $4.90
BUY PUT FEB 50.00 PRQ-NJ open interest=1050 current ask $3.30
BUY PUT FEB 47.50 PRQ-NW open interest=5382 current ask $2.10
BUY PUT FEB 45.00 PRQ-NI open interest=2323 current ask $1.30

Annotated Chart:
Costco (COST)

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          03/05/09 (unconfirmed)
Average Daily Volume =      4.8 million  


HSBC Holdings - HBC - close: 45.85 change: -0.85 stop: 47.75

Why We Like It:
As the market watches Citigroup (C) slowly faded toward multi-year lows again they're growing more and more concerned about another one of the world's largest financial institutions. That company is HBC. Put option volume on HBC has reached titanic levels. Traders trying to short it can't find enough stock to borrow.

Many pundits believe that there will be another round of "trouble" for the big banks before the environment finally improves. By the look of HBC's stock investors are worried. The bounce failed at $50.00 and shares are already testing their 2008 lows. Currently HBC has support around the $45.00 region.

I am suggesting that readers use a trigger at $44.45 to buy puts. If triggered we have two targets. Our first target is $40.25. Our second target is $35.25.

Suggested Options:
We are suggesting the March puts. Trigger is $44.45.

BUY PUT MAR 45.00 HBC-OI open interest=91518 current ask $5.20
BUY PUT MAR 40.00 HBC-OH open interest=16943 current ask $3.40
BUY PUT MAR 35.00 HBC-OG open interest=13857 current ask $2.15

Annotated Chart:
HSBC Holdings (HBC)

Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          03/02/09 (unconfirmed)
Average Daily Volume =      1.9 million  


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