NEW DIRECTIONAL CALL PLAYS

UltraShort SP& 500 - SDS - cls: 60.00 chg: +2.28 stop: 55.90

Why We Like It:
Initially my plan was to launch a put position on the S&P 500 SPDRs (SPY) with a trigger under $87.50 just to make sure the SP& 500 broke down under the neckline of its bearish head-and-shoulders pattern. If the S&P 500 does breakdown then the pattern is forecasting a drop toward the 810-800 zone, which is the 81.00-80.00 zone for the SPY. However, I decided to get the biggest bang for our buck we can use the SDS ultra-short ETF, which tries to move twice the inverse of the S&P 500 index.

I'm suggesting a trigger to buy calls at $60.50 and because this is a double inverse ETF we'll use a wide stop loss. Readers may want to trade half or less than their normal position size. Our first target to take profits is the $64.00 level. Our second target is the $67.00 level. My time frame is several weeks (toward August option expiration) but traders might want to buy September calls instead.

Suggested Options:
I'm suggesting the August calls. Strikes are available at $1.00 increments.

BUY CALL AUG 60.00 SDS-HH open interest=1384 current ask $4.90
BUY CALL AUG 65.00 SDS-HM open interest= 709 current ask $3.20

Annotated Chart:

Picked on     July xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =        40 million  
Listed on  July 07, 2009         


NEW DIRECTIONAL PUT PLAYS

Sears Holdings - SHLD - close: 59.75 change: -3.82 stop: 65.60

Why We Like It:
Retail stocks are starting to breakdown as investors begin to worry about the struggling consumer. Unemployment is expected to climb both here and in Europe for the next six to nine months. This is going to weigh on consumer confidence and that usually means they'll spend less. SHLD just broke down under technical support at its 50-dma and round-number support at $60.00.

I'm suggesting we open this play in two parts. Buy half your put position now and then buy the second half if the stock bounces back into the $62.00-64.00 zone. Our first target is $55.10. Our second target is $50.50.

Suggested Options:
I am suggesting the August puts. It is always up to the individual trader to decide which month and which strike price best suits your trading style and risk profile.

BUY PUT AUG 60.00 KTQ-TL open interest=1307 current ask $5.50
BUY PUT AUG 55.00 KTQ-TK open interest= 758 current ask $3.20

Annotated Chart:

Picked on     July 07 at $ 59.75
Change since picked:      + 0.00
Earnings Date           08/27/09 (unconfirmed)
Average Daily Volume =       1.2 million  
Listed on  July 07, 2009