NEW DIRECTIONAL CALL PLAYS

O'Reilly Automotive - ORLY - close: 59.06 change: +0.51

Stop Loss: 57.75
Target(s): 62.75, 67.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see Trigger

Company Description

Why We Like It:
ORLY has spent the last four months consolidating sideways between resistance near $60 and technical support at its rising 200-dma. Now shares are inching closer toward resistance at $60.00 again and ORLY is poised to break higher. I am suggesting a trigger to buy calls at $60.15. If triggered our targets are $62.75 and $67.25. The market is a little overbought here so I would keep our position size small.

Trigger @ $60.15

- Suggested Positions -

Buy the May $60 calls (ORLY1121E60)

- or -

Buy the June $60 calls (ORLY1118F60)

Annotated Chart:

Entry on May xxth at $ xx.xx
Earnings Date 04/27/11
Average Daily Volume = 1.1 million
Listed on April 30th, 2011


Powershares QQQ ETF - QQQ - close: 59.08 change: -0.05

Stop Loss: 56.45
Target(s): 64.00
Current Option Gain/Loss: Unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see Trigger

Company Description

Why We Like It:
The QQQ is an exchange traded fund designed to replicate the movement in the NASDAQ-100 index ($NDX). Powered by strong earnings results the $NDX has broken out to new multi-year highs on Wednesday. There was very little profit taking the last couple of sessions, which suggests strength. The market could see further gains due to the beginning of a new month where fund managers put new money to work. Thus more aggressive traders may want to go ahead and buy calls on the QQQ right here.

I would prefer to buy calls on a dip. We're setting our buy-the-dip trigger at $58.15. More conservative traders could wait for a dip toward the 30 or 50-dma instead. If we are triggered at $58.15 we'll use a stop loss at $56.45. The Qs don't move very fast so we'll have to be patient.

buy-the-dip Trigger @ $58.15

- Suggested Positions -

Buy the June $60 calls (QQQ1118F60)

- or -

Buy the July $60 calls (QQQ1116G60)

Annotated Chart:

Entry on May xxth at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 50 million
Listed on April 30th, 2011


NEW DIRECTIONAL PUT PLAYS

iShares Silver Trust - SLV - close: 46.88 change: -0.38

Stop Loss: n/a
Target(s): $40-37.50 range
Current Option Gain/Loss: + 0.0%
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Did you notice the long-term chart of silver in Jim's wrap this weekend? The rally in silver prices and the SLV has been exceptionally strong. Yet now the price of silver is nearing potential resistance. Yes, the old high of $50.50 an ounce from 1980 could easily be a target traders are planning to sell at. The $50.00 mark for silver futures certainly works as a nice, big round-number to target. It looks like the SLV is already seeing some profit taking with the massive volume over the last several days (see chart below).

I am suggesting put options on the SLV. This is pure speculation that silver could see some profit taking soon and when it happens the move down will likely be very swift and sharp. Normally trying to pick a top in a bubble-like move higher is very dangerous. Thankfully with options we can limit our risk to whatever we buy the option for. However, I would consider this a very high-risk/high reward play. Sort of like a little lottery ticket. That's why we want to buy out of the money puts to keep our initial investment (or gamble in this case) very low.

I am not setting any stop loss on this trade - at least not yet. Silver could see some big spikes higher before finally reversing.

(Open Small Bearish Positions Now)

- Suggested Positions -

Buy the July $40.00 PUT (SLV1116S40) current ask $1.46

Annotated Chart:

Entry on May 2 at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 79 million
Listed on April 30th, 2011