Editor's Note:

We seriously considered adding a put play on Goldman Sachs (GS) tonight. The stock reversed this morning after it failed near its trendline of lower highs. Then GS accelerated lower this afternoon after Meredith Whitney, a widely followed analyst, lower her earnings estimates for GS.

I would be tempted to buy puts on GS now with a stop above today's high and aim for the $92.50 level. More aggressive traders could aim for the $90 area.

- James


NEW DIRECTIONAL PUT PLAYS

Caterpillar Inc. - CAT - close: 77.67 change: +0.82

Stop Loss: 80.25
Target(s): 73.50, 70.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The stock market's three-day rally experienced a sharp afternoon reversal lower. It could be a signal that the market's oversold bounce has run out of gas. Odds of further profit taking tomorrow look pretty good. With that in mind we want to take advantage of the weakness in shares of CAT.

This stock's oversold bounce came to a dead stop under resistance at the $80.00 level. The failed rally here is an entry point to buy puts and limit our risk with a stop above resistance. I am suggesting we buy puts now with a target at $73.50 and $70.50.

- Suggested Positions -

buy the OCT $75 PUT (CAT1122V75) current ask $3.10

Annotated Chart:

Entry on September 28 at $ xx.xx
Earnings Date 10/24/11 (unconfirmed)
Average Daily Volume = 11.2 million
Listed on September 27, 2011