Editor's Note:

My short-term bias for stocks is still down but the commodity sector is so oversold this looks like a lower-risk entry point to speculate on a bounce.


NEW DIRECTIONAL CALL PLAYS

Ultra-Short REIT - SRS - close: 22.67 change: +0.64 stop: 19.45

Why We Like It:
We've been hearing about how commercial real estate was the next shoe to drop for months. Well it finally looks like the sector is breaking down (along with the rest of the market). One way to play it is the SRS. This is a double-short ETF, which tries to move twice the daily inverse of the DJ U.S. real estate index. This index is full of REITs. The top ten components are: SPG, NLY, PSA, EQR, VNO, PCL, HCP, BXP, AVB, and HCN.

I'm suggesting readers buy calls on the SRS now but if we get the chance a dip in the $21.00-20.00 zone would be more attractive. This ETF can be somewhat volatile so I'm using a wide stop loss at $19.45. I suggest readers only trade half or less than their normal position size. Our first target is $26.00. Our second target is $29.50.

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

BUY CALL AUG 22.00 SAK-HP open interest=1074 current ask $3.10
BUY CALL AUG 25.00 SAK-HE open interest=1382 current ask $1.95
BUY CALL AUG 28.00 SAK-HU open interest=5981 current ask $1.25

Annotated Chart:

Picked on     July 09 at $ 22.67
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =           million  
Listed on  July 09, 2009         


U.S. Oil Fund - USO - close: 32.77 change: +0.20 stop: 31.95

Why We Like It:
I believe oil has fallen too far too fast. Crude has lost about 20% in less than two weeks and now futures are testing previous resistance and potential support at $60.00. I'm suggesting readers play the oversold bounce with calls on the USO oil ETF.

Buy calls now with a tight stop at $31.95. Our first target is $34.95. Our second target is $35.95. My time frame is less than two weeks.

Suggested Options:
Aggressive traders can use the July calls, which expire in six trading days. I'm suggesting the rest of us use the August calls.

BUY CALL JUL 33.00 UBO-GG open interest= 7819 current ask .90
BUY CALL JUL 35.00 UBO-GI open interest=15112 current ask .25

BUY CALL AUG 33.00 UBO-HG open interest=3099 current ask $2.20
BUY CALL AUG 35.00 UBO-HI open interest=2404 current ask $1.40

Annotated Chart:

Picked on     July 09 at $ 32.77
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =      13.7 million  
Listed on  July 09, 2009