NEW DIRECTIONAL CALL PLAYS

ProShares Ultra(long) S&P 500 - SSO - close: 54.98 change: -0.74

Stop Loss: 52.75
Target(s): 59.00
Current Option Gain/Loss: + 0.0%
Time Frame: 8 to 10 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The S&P 500 has pulled back toward support near 1340 and bounced. Today's move looks like a bullish entry point to buy the dip. Instead of buying calls on the SPY ETF I am suggesting calls on the SSO double-long ETF. Since the SSO is twice as volatile as the market we want to keep our position size small.

I am suggesting we buy calls on the SSO now but you could choose to wait for another dip near $54.50. We'll use a stop loss at $52.75. More conservative traders may want a stop closer to $54.00 instead. Our multi-week target is the $59.00 level.

Small Positions Only - Suggested Positions -

Buy the June $56 call (SSO1118F56) current ask $1.75

- or -

Buy the September $60 call (SSO1117I60) current ask $2.16

Annotated Chart:

Entry on May 5th at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 11.3 million
Listed on May 4th, 2011


NEW DIRECTIONAL PUT PLAYS

Molycorp - MCP - close: 72.01 change: -5.53

Stop Loss: 76.15
Target(s): 63.50
Current Option Gain/Loss: + 0.0%
Time Frame: only 4 days
New Positions: See below.

Company Description

Why We Like It:
MCP produces rare-earth materials. Rare earth stocks have been a hot industry in 2011. Yet it looks like the rally in MCP may have stalled. After breaking out yesterday to another new high the stock reversed hard today. I am suggesting very small bearish positions now.

Why small positions? Because this is a very aggressive, higher-risk trade. We only have four days for it to work. MCP is due to report earnings on May 10th after the closing bell. We will open positions tomorrow and plan on closing them on May 10th at the close to avoid holding over earnings. Another reason this is an aggressive trade is that we are jumping in before MCP has confirmed the bearish reversal formed today. Yet another reason this is a higher-risk trade is that MCP has very short interest. If something were to spark a short squeeze then MCP could rally sharply since short interest is nearly 20% of the float. Thankfully with options our maximum risk is what we paid for the option.

I am setting our stop loss at $76.15. Our target is $63.50.

Small Positions Only!

buy the May $65 put (MCP1121Q65) current ask $1.95

Annotated Chart:

Entry on May 5th at $ xx.xx
Earnings Date 05/10/11 (confirmed)
Average Daily Volume = 7.3 million
Listed on May 4th, 2011