Editor's Note:

The logic behind tonight's bullish trades:

Everyone is expecting a bad jobs number tomorrow. Last month we were looking for +100K or more and got +18K. Tomorrow economists are expecting between 80K-100K but many have been ratcheting down their estimates toward 50K or lower. The "whisper" number that traders are expecting is actually negative jobs growth. The question you have to ask is "how much of a bad jobs number has already been priced into a stock market that's down -10% in the last two weeks?"

If the jobs number is another disaster will stocks sell off again or will they bounce? I am betting the market will see a bounce and that's why we want to buy calls on the these index ETFs now. However, we only want to buy calls if these index ETFs and the S&P 500 index both open in positive territory tomorrow. Listing this conditional entry point could prevent the newsletter from getting triggered.

There is a very real possibility that a bearish jobs number pushes the market lower at the open only to see the market reverse and rocket higher into the closing bell. If this happens, our new call plays will not open but you, as an individual, are a lot more nimble. You may want to go ahead and launch positions if the markets turn positive.

- James


NEW DIRECTIONAL CALL PLAYS

Dow Jones Industrial Avg. (ETF) - DIA - close: 113.71 change: -5.09

Stop Loss: 112.40
Target(s): 117.75, 119.75
Current Option Gain/Loss: Unopened
Time Frame: 1 to 2 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Stocks are extremely oversold as investors worry over an economic slow down both here in the U.S. and abroad. The DJIA is off more than 1,340 points in the last ten trading days. The trend is down and we are now facing a larger bearish pattern of lower highs and lower lows but short-term stocks are overdone to the downside.

It's time for an oversold bounce. The plan is to buy calls at the open if the DIA and S&P 500 index open positive. This should be a short-term trade from a few days to maybe a couple of weeks (although that's unlikely). We will list August options but you may want to trade Septembers.

Please see tonight's editor's note above for more our new call trades.

buy calls if DIA & S&P500 open positive on Friday

- Suggested Positions -

buy the AUG $115 call (DIA1120H115) current ask $2.43

- or -

buy the SEP $115 call (DIA1117I115) current ask $3.45

Annotated Chart:

Entry on August xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 8.0 million
Listed on August 4, 2011


ProShares Ultra QQQ - QLD - close: 79.30 change: -8.00

Stop Loss: 77.75
Target(s): 84.75, 89.00
Current Option Gain/Loss: Unopened
Time Frame: 1 to 2 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Aggressive traders looking for more bang for their buck may want to check out the QLD. This is the double long (2x) ETF based on the NASDAQ-100 index. While the tech-heavy $NDX has seen a sharp contraction if stocks bounce it will mostly likely see the biggest bounce.

Right now stocks are extremely oversold and due for a bounce. The plan is to buy calls at the open if the QLD and S&P 500 index open positive. This should be a short-term trade from a few days to maybe a couple of weeks (although that's unlikely). We will list August options but you may want to trade Septembers.

Please see tonight's editor's note above for more our new call trades.

buy calls if QLD & S&P500 open positive on Friday

- Suggested Positions -

Buy the AUG $85 call (QLD1120H85) current ask $2.15

- or -

Buy the SEP $85 call (QLD1117I85) current ask $3.90

Annotated Chart:

Entry on August xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 4.0 million
Listed on August 4, 2011


SPDRs S&P 500 ETF - SPY - close: 120.26 change: -5.91

Stop Loss: 117.90
Target(s): 124.50, 126.25
Current Option Gain/Loss: Unopened
Time Frame: 1 to 2 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Right now stocks are extremely oversold and due for a bounce. The plan is to buy calls at the open if the SPY opens positive. This should be a short-term trade from a few days to maybe a couple of weeks (although that's unlikely). We will list August options but you may want to trade Septembers.

Please see tonight's editor's note above for more our new call trades.

buy calls on the SPY if it opens positive on Friday

- Suggested Positions -

buy the AUG $122 call (SPY1120H122) current ask $2.47

- or -

buy the SEP $124 call (SPY1117I124) current ask $2.70

Annotated Chart:

Entry on August xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 218 million
Listed on August 4, 2011


NEW DIRECTIONAL PUT PLAYS

CBOE Volatility Index - VIX - close: 31.66 change: +8.28

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: + 0.0%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Equity Description

Why We Like It:
The volatility index has skyrocketed from 17.50 on July 22nd to over 31.50 today. This +80% rise is not surprising given the huge sell-off in stocks. Yet the VIX rarely trades at these levels for long. As soon as the market stops falling the VIX will see a contraction.

I am suggesting we buy puts options on the VIX immediately. Nimble traders may want to wait a few hours tomorrow. If the jobs data is really bad the market could spike down even lower, which would push the VIX higher, but I'm expecting a rebound tomorrow in stocks and thus a retreat in the VIX. Since we don't know what the jobs number is tomorrow I am not listing a stop loss on this trade. We should consider this a higher-risk, speculative trade. I'm setting our targets at 26.00 and 22.50.

NOTE: August VIX options expire after the 17th of the month. You may want to buy Septembers instead.

Buy Puts on the VIX

- Suggested Positions -

buy the AUG $25.00 PUT (VIX1117T25) current ask $1.95

- or -

buy the SEP $25.00 PUT (VIX1121U25) current ask $3.50

Annotated Chart:

Entry on August 5 at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = xxx
Listed on August 4, 2011