Editor's Note:

FYI: Keep an eye on Netflix (NFLX). I am not suggesting any trades on NFLX at this time but it looks like the stock is forming a huge, bull-flag pattern. You might want to keep it on your watch list in case NFLX provides an entry point in the next couple of weeks.


NEW DIRECTIONAL CALL PLAYS

Volatility Index - VIX - close: 21.74 change: -0.36 stop: 21.45

Target(s): 29.00, 32.00, 35.00
Key Support/Resistance Areas: 20.00, 22.00, 24.00, 26.00, 28.00
Current Gain/Loss: n/a
Time Frame: Two or three Weeks
New Positions: Yes, trigger @ 24.25

Company Description:
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility. The CBOE Volatility Index - more commonly referred to as "VIX" - is an up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500® Index (SPX) option bid/ask quotes. VIX uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index. (source: company press release or website)

Why We Like It:
If you are reading the market commentary then you know we don't trust this market rally and expect stocks to turn weak again as we head into fall. When stocks do roll over it should produce a rally in the VIX. I am suggesting a trigger to buy calls on the VIX if the index hits $24.25. We'll use a stop loss at $21.45. If triggered our first target to take profits is at $29.00. Our second targets is $32.00 and our third and final target is $35.00.

NOTE: VIX options do not expire normally. VIX options expire on the Wednesday that is thirty days prior to the third Friday of the following calendar month, the SPX options expiring in exactly 30 days account for all of the weight in the VIX calculation. VIX options settle on these Wednesdays in order to facilitate the special opening procedures that establish opening prices for those SPX options used to calculate the exercise settlement value for VIX options. (THUS September VIX options expire on Wednesday, Sept. 15th)

Suggested Position: 2010 Sept. 30.00 calls (VIX1015I30) current ask $2.35

Annotated Chart:

Entry on August ?? at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = n/a
Listed on August 7th, 2010


NEW DIRECTIONAL PUT PLAYS

Occidental Petrol. - OXY - close: 76.33 change: -1.27 stop: 76.25

Target(s): 70.50, 66.00
Key Support/Resistance Areas: 75-74.00, 70.00, 65.00
Current Gain/Loss: n/a
Time Frame: Three or Four Weeks
New Positions: Yes, trigger at $73.90

Company Description:
Occidental Petroleum Corporation is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America regions. Oxy is the fourth largest U.S. oil and gas company, based on equity market capitalization. Oxy's wholly owned subsidiary, OxyChem, manufactures and markets chlor-alkali products and vinyls. Occidental is committed to safeguarding the environment, protecting the safety and health of employees and neighboring communities and upholding high standards of social responsibility in all of the company's worldwide operations. (source: company press release or website)

Why We Like It:
Shares of OXY have been underperforming their peers in the oil sector for weeks. The sell-off appears to be picking up steam and this time I think it will breakdown under key support near $75.00-74.00. Most of the lows over the past several months have been near $74.25. I am suggesting a trigger to buy puts at $73.90. If triggered I'm suggesting a stop loss at $76.25. Our first target is $70.50. Our second target is $66.00.

Suggested Position: 2010 Sept. $70.00 puts (OXY1018U70) current ask $1.09

Annotated Chart:

Entry on August ?? at $ xx.xx
Earnings Date 10/21/10
Average Daily Volume = 4.4 million
Listed on August 7th, 2010


Procter & Gamble - PG - close: 60.02 change: +0.16 stop: varies

Target(s): 55.00
Key Support/Resistance Areas: 59.00, 61.00
Current Gain/Loss: n/a
Time Frame: A few Weeks
New Positions: Yes, trigger at $61.00 or 58.75

Company Description:
Four billion times a day, P&G brands touch the lives of people around the world. The company has one of the strongest portfolios of trusted, quality, leadership brands, including Pampers(R), Tide(R), Ariel(R), Always(R), Whisper(R), Pantene(R), Mach3(R), Bounty(R), Dawn(R), Gain(R), Pringles(R), Charmin(R), Downy(R), Lenor(R), Iams(R), Crest(R), Oral-B(R), Duracell(R), Olay(R), Head & Shoulders(R), Wella(R), Gillette(R), Braun(R) and Fusion(R). The P&G community includes approximately 127,000 employees working in about 80 countries worldwide (source: company press release or website)

Why We Like It:
PG reported earnings last week. The company missed estimates and guided lower. Shares gapped down but the selling stalled near support around $59.00. You might think that a consumer products company like PG would be see as a strong, safe-haven play. Yet the stock has been building a topping pattern over the last several months. Now shares look ready to begin a new leg lower.

I am suggesting two different triggers to buy puts. PG might fill the gap created this past week. If the stock does see a bounce I am suggesting we buy puts at $61.00 with a stop loss at $63.26. On the other hand if PG rolls over from here we want to buy puts if PG hits $58.80 and use a stop loss at $61.05.

Our bearish target is $54.00 and our time frame is approximately four weeks.

Suggested Position: 2010 Sept. $57.50 put (PG1018U57.5) current ask $0.58

Annotated Chart:

Entry on August ?? at $ xx.xx
Earnings Date 10/28/10
Average Daily Volume = 12.5 million
Listed on August 7th, 2010