Play Editor's Note:
A lot of traders were caught off guard by the market's sell-the-news reaction to Geitner's speech today. Wall Street hates uncertainty and there was a significant lack of details to assuage what were probably unrealistic expectations. I tried to come up with candidates to buy this decline but couldn't come up with anything strong enough. If the markets continue lower tomorrow then my market bias will turn bearish. As of this moment I'm neutral but think the market has presented some tempting albeit very aggressive (a.k.a. higher-risk) bullish trades.
Another trade readers might want to consider is a call play on the SSO, which is the double-long on the S&P 500 index. You could buy calls on the SSO now with a stop loss around $20.80. If the SSO breaks down then consider buying puts under $20.75.
Apple Inc. - AAPL - close: 97.83 change: -4.68 stop: 94.85
Why We Like It:
We want to buy calls here. Very conservative traders will want to consider a stop loss under today's low probably $96.90ish. I am going to suggest a stop loss at $94.85, which is under the simple 10-dma and under round-number support at $95.00.
Our first target is $104.00. Our second target is $109.00.
BUY CALL MAR 95.00 QAA-CS open interest=21191 current ask $8.05 BUY CALL MAR 100.0 QAA-CT open interest=10248 current ask $5.45 BUY CALL MAR 105.0 QAA-CA open interest=11453 current ask $3.45
Goldman Sachs - GS - close: 90.40 change: -7.49 stop: 87.85
Why We Like It:
One strategy might be a straddle at $90.00 by buying both the $90 call and $90 put. If you bought February options it would cost you about $10.30 so GS would have to move more than $10.00 before February expiration for you to make any money. A March $90 straddle would cost you almost $20. I think both are too expensive.
Another strategy would be a strangle. You could buy the February $95 calls and $85 put for a little more than $6.00. Or you might want the March $100 call and $80 put for about $11.00. February options expire in eight trading days so if you want to play a strangle I'd use March options.
This play is a directional bullish bet that GS bounces from its trendline. Conservative traders may want to use a stop loss under today's low (89.70). I want to give GS just a little more room since the market can be volatile these days. We'll use a stop at $87.85. Our target is the $99.00-100.00 zone.
BUY CALL MAR 90.00 GS-CR open interest=6766 current ask $9.45 BUY CALL MAR 95.00 GS-CS open interest=3755 current ask $6.85 BUY CALL MAR 100.0 GS-CT open interest=14662 current ask $4.75 Or use February calls, which expire in eight trading days. BUY CALL FEB 90.00 GS-BR open interest=13234 current ask $5.30 BUY CALL FEB 95.00 GS-BS open interest=12455 current ask $2.94 BUY CALL FEB 100.0 GS-BT open interest=25311 current ask $1.40