NEW DIRECTIONAL CALL PLAYS

Volatility Index - VIX - close: 21.68 change: +1.72 stop: 18.95

Why We Like It:
Our market outlook for January is relatively bearish. Odds are good that stocks could see a correction. Any significant decline is going to drive up demand for put options and that's going to send the VIX higher. I'm suggesting we buy calls on the VIX now. Our first target to take profits is at 27.50. Our second target is 32.50. This index can be volatile (naturally) so I'm listing our stop loss at 18.95.

Suggested Options:
I am suggesting the February calls. That should give us enough time to capture any early 2010 correction. VIX options have their own expiration date. The February options should expire on Feb. 17th.

This is the new CBOE option symbol format:
The "10" in front of Feb is the year 2010

BUY CALL 10 Feb 25.00 VIX1017B25 open interest=192,867 current ask $2.90
-or-
BUY CALL 10 Feb 27.50 VIX1017B27.5 open interest=114,679 current ask $1.95

Annotated Chart:

Entry  on   January 02 at $ 21.68 
Change since picked:       + 0.00
Earnings Date            --/--/--
Average Daily Volume =        --- million  
Listed on   January 02, 2010         


NEW DIRECTIONAL PUT PLAYS

Fedex Corp. - FDX - close: 83.45 change: -1.72 stop: 85.51

Why We Like It:
FDX has been struggling ever since its December earnings report. The stock looks ready to breakdown under technical support at its 50-dma soon. I'm suggesting a trigger to buy puts at $81.90. If triggered our first target is $78.10 near the rising 100-dma. Our second target is $75.10. More aggressive traders could aim for the November 2009 lows near $72.00.

Suggested Options:
I am suggesting the February puts. My preference is the $80 strike.

BUY PUT FEB 80.00 FDX-NP open interest= 426 current ask $2.40

Annotated Chart:

Entry  on   January xx at $ xx.xx <-- TRIGGER @ 81.90
Change since picked:       + 0.00
Earnings Date            03/18/10 (unconfirmed)
Average Daily Volume =        3.3 million  
Listed on   January 02, 2010         


Flowserve - FLS - close: 94.53 change: -1.37 stop: 98.25

Why We Like It:
FLS produced a bearish double top with the peaks in October and November. Shares have been suffering under a trend of lower highs ever since. In the last two trading days FLS has broken down from a pennant-shaped consolidation pattern and now the stock is facing support at $94.00. I'm suggesting a trigger to buy puts at $93.85. If triggered our first target is the long-term trendline of higher lows, which places our exit around $88.50. I'm suggesting we exit 2/3rds to 3/4ths of our position at $88.50. We'll keep a small position and aim for $85.15.

Suggested Options:
I am suggesting the February puts. My preference is the $90 strike.

BUY PUT FEB 90.00 FLS-NR open interest= 55  current ask $2.55

Annotated Chart:

Entry  on   January xx at $ xx.xx <-- TRIGGER @ 93.85
Change since picked:       + 0.00
Earnings Date            02/24/10 (unconfirmed)
Average Daily Volume =        612 thousand 
Listed on   January 02, 2010