NEW DIRECTIONAL CALL PLAYS

Dresser-Rand Group - DRC - close: 60.97 change: +0.51

Stop Loss: 59.75
Target(s): 64.90
Current Option Gain/Loss: Unopened
Time Frame: Exit prior to earnings on Feb. 28
New Positions: Yes, see below

Company Description

Why We Like It:
DRC manufactures custom-engineered rotating equipment for a number of different industries. Investors have been buying the dips in DRC's stock. The recent bounce from what should be round-number support at $60.00 looks like a new bullish entry point. I want to see a little more confirmation. Thus I am suggesting a trigger to buy calls at $61.25. If triggered we will aim for $64.90 but we'll plan on exiting prior to the late February (still unconfirmed) earnings report.

Trigger @ 61.25

- Suggested Positions -

buy the Mar $65 call (DRC1316c65) current ask $0.75

Annotated Chart:

Entry on February -- at $---.--
Average Daily Volume = 450 thousand
Listed on February 09, 2012


CBOE Volatility Index - VIX - close: 13.02 change: -0.48

Stop Loss: 11.45
Target(s): 22.00-25.00 range
Current Option Gain/Loss: + 0.0%
Time Frame: 8 to 9 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The CBOE volatility index has traditionally been viewed as an investor fear gauge. Low levels on the VIX indicate low levels of fear. High levels indicate elevated levels of fear. Naturally as stocks move lower the VIX moves higher. Right now the VIX is trading near multi-year lows thanks to multi-year highs in the major stock indices. We all know that stocks will see a correction lower eventually.

We are not calling a top in the market right now but we do expect a correction sooner rather than later. It may be late February or March but stocks will see a pullback. We are suggesting traders buy calls on the VIX to take advantage of what will likely be a sharp spike higher in volatility. I am setting a stop loss at $11.45. You might want to play this with no stop and just manage your risk based on the size of your option position.

- Suggested Positions -

buy the Apr $16 call (VIX1317D16) current ask $1.95

Annotated Chart:

Entry on February -- at $---.--
Average Daily Volume = n/a
Listed on February 09, 2012


NEW DIRECTIONAL PUT PLAYS

EV Energy Partners - EVEP - close: 56.12 change: -0.26

Stop Loss: 57.25
Target(s): 50.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to earnings on Feb. 27
New Positions: Yes, see below

Company Description

Why We Like It:
EVEP is a master limited partnership in the energy sector. Currently shares offer a 5% dividend yield but that doesn't seem to be slowing the stock's decline. EVEP has been underperforming. Now the stock is nearing support at the $55.00 level.

I am suggesting a trigger to buy puts at $54.75. If triggered our target is $50.50.

Trigger @ 54.75

- Suggested Positions -

buy the Mar $55 put (EVEP1316o55) current ask $2.95

Annotated Chart:

Entry on February -- at $---.--
Average Daily Volume = 300 thousand
Listed on February 09, 2012