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Call Updates

Amer. Intl.Group - AIG - cls: 2.05 chg: -1.70 stop: n/a

News of an $85 billion loan from the U.S. government to AIG to prevent the company from filing bankruptcy did little to alleviate fears in the financial sector. Shares of AIG gapped open lower at $2.29 and spent the session hovering near the $2.00 level. Our plan was to buy AIG at the open this morning and then sell a covered call. Our pick was the January 2009 $5.00 call. The call opened at 86 cents and is currently trading around 55 cents. If we use the 55-cent number then our cost basis in AIG is about $1.74/share ($2.29 stock minus the 55-cent call). This is a speculative bet that AIG will survive and that shares will bounce to $5.00 or more before January 2009 option expiration. If AIG does trade at $5.00 or higher we expect to be called out. Our appreciation on the stock should be 118% when we get called out. More conservative traders may want to play with some sort of stop loss. An example would be a stop loss at $1.49 or $0.99. However, if you do play with a stop loss on the stock you have to buy back your outstanding call option position otherwise it would be a naked call position, which would create unlimited risk for you. We are not using a stop loss. Volatility in the financials will continue and AIG could easily see some intraday spikes lower.

Picked on September 17 at $ 2.29 *opened at $2.29
Change since picked: - 0.24
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 69.8 million

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SPDR S&P Oil - XOP - cls: 45.65 chg: -1.05 stop: 42.39

A $6.00 rally in crude oil was not enough to stem the selling in energy stocks. Today investors were marching to the "sell first, ask questions later" drum beat. The energy sector did fare better than the broader market and the XOP only lost 2% versus a 4.7% decline in the S&P 500. We would use another dip near $44.00 or $43.00 as a bullish entry point but in this market we'd wait for signs of a bounce first before considering new call positions. We have two targets. Our first target is $49.95. Our second target is $53.50.

Picked on September 16 at $ 46.70
Change since picked: - 1.05
Earnings Date 00/00/00
Average Daily Volume = 2.0 million
 

Put Updates

Lamar Advertising - LAMR - cls: 34.85 chg: -1.04 stop: 37.55*new*

I am a little surprised that LAMR did not show more weakness today. The stock only lost 2.9% but shares did close under the $35.00 level. The trend remains bearish and we're adjusting our stop loss to $37.55. We want to remind readers that stocks in general are very oversold and with the VIX this high it's predicting a bounce soon. This may not be a good atmosphere to open new bearish positions. Our target is the 31.50 mark. More aggressive traders could aim for a new relative low.

Picked on September 15 at $ 35.90 *triggered
Change since picked: - 1.05
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 1.4 million

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Volatility Index - VIX - cls: 30.30 chg: -1.40 stop: n/a

The VIX gapped open around 32.00 and then surged past the 36.00 level as the market accelerated lower into the closing bell. We warned readers yesterday that these were crazy days in the market and that the VIX could spike to new highs before reversing lower. The high on January 20, 2008 was 37.57 and the high on August 12, 2007 was 37.50. Readers over 35.00 are pretty uncommon but there were several readings above 40.00 following the market top in 2000. The post 9/11 drop sent the VIX to 57.31, which is probably a record. I see today's surge in the VIX as just a better entry point to buy puts. If you didn't buy puts this morning we would definitely buy puts tonight. We're setting our first target at 25.50. Our second target is 21.00. It's up to you if you want to play the October puts or the November puts.

Picked on September 16 at = 30.30
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = --- million
 

Strangle Updates

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Dropped Calls

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Dropped Puts

Roper Industries - ROP - cls: 56.92 chg: -1.65 stop: 59.15

The DJIA is down more than 800 points this week and the S&P 500 is sinking to new multi-year lows. Yet shares of ROP are still stuck in a trading range above the $55.00 level. The overall trend is bearish but the stock just isn't cooperating. We're cutting this one loose. Let's not tie up our capital in something that isn't moving with the market this volatile.

Picked on September 03 at $ 58.19 /early exit 56.92
Change since picked: - 1.29
Earnings Date 10/23/08 (unconfirmed)
Average Daily Volume = 664 thousand
 

Dropped Strangles

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