NEW DIRECTIONAL PUT PLAYS

Apple Inc. - AAPL - close: 533.16 change: -12.02

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

Company Description

Why We Like It:
The rally in AAPL has been extremely impressive with a +50% move off its late November 2011 lows. Now the stock is at risk of a "sell the news" type of move. The company is planning a big announcement on Wednesday. Most pundits expect AAPL to announce the iPad 3 or some new version of the iPad tablet computer. Why is this a trade? Normally AAPL tends to see a big run up prior to a major announcement and then the stock sees a sell-off following a big announcement as short-term traders exit.

Make no mistake, this is an aggressive trade. AAPL is very overbought and due for a correction but it has been crushing the bears for months. We are suggesting small bearish put positions at the open tomorrow morning. More nimble traders may want to initiate positions at the closing bell tomorrow. The announcement is Wednesday. I am not listing a stop loss on this trade. AAPL stock could see an initial spike higher on the news and then reverse.

Instead of setting a target price to exit on AAPL's stock we're setting our exit price on the individual option instead.

Must Open Position before the close on March 6th

- Suggested (Small) Positions -

buy the Mar $520 PUT (AAPL1217o520) current ask $6.65
Exit target: when the option bid hits $11.00

- or -

Very Aggressive - these expire this week!
buy the Mar $525 PUT (AAPL1209o525) current bid 5.30
Exit target: when the option bid hits $9.00

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 04/24/12 (unconfirmed)
Average Daily Volume = 22.1 million
Listed on March 05, 2012


AMERIGROUP Corp. - AGP - close: 66.52 change: -1.71

Stop Loss: 68.75
Target(s): 61.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The rally in AGP, a healthcare company, has reversed. The stock rose up toward its all-time highs near $75 set in 2011 and failed. This has created what looks like a huge bearish double top pattern. More recently AGP has been correcting lower with a trend of lower highs. Today the stock broke support at the 50-dma.

I am suggesting we open bearish put positions tomorrow morning with a stop loss at $68.75. Our target is $61.00. More conservative traders may want to wait for AGP to trade under the early February low near $66.00 before initiating new put positions.

NOTE: March puts expire in less than two weeks. April puts have much wider spreads.

- Suggested Positions -

buy the Mar $65 PUT (AGP1217o65) current ask $1.15

- or -

buy the Apr $60 PUT (AGP1221p60) current ask $1.30

Annotated Chart:

Annotated Chart:

Entry on March xx at $ xx.xx
Earnings Date 05/02/12 (unconfirmed)
Average Daily Volume = 950 thousand
Listed on March 05, 2012