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Call Updates

Amer. Intl.Group - AIG - cls: 2.69 chg: +0.64 stop: n/a

It looks like the selling in AIG may have finally stalled. Shares gapped higher with the market this morning, pulled back like most stocks midday and then eventually closed higher. AIG ended the day up 31%. We're not suggesting new covered call positions at this time but that doesn't mean you can't adjust the strategy for new positions. We suggested that readers buy AIG stock yesterday and sell the January 2009 $5.00 call. You could do that same play today or if you're feeling optimistic you could sell the January 2009 $6.00 call or $7.50 call. We're not playing with a stop loss at this time because the market is still extremely volatile and we don't want to be taken out on an intraday spike. Selling the covered call is a way to reduce our overall risk of just buying the stock.

Picked on September 17 at $ 2.29 *opened at $2.29
Change since picked: + 0.30
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 69.8 million


SPDR S&P Oil - XOP - cls: 47.96 chg: +2.31 stop: 44.85 *new*

Crude oil continued to bounce into Thursday and the widespread afternoon rally in stocks helped the XOP post a 5% gain. We are raising our stop loss to $44.85. 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: + 1.26
Earnings Date 00/00/00
Average Daily Volume = 2.0 million

Put Updates

Volatility Index - VIX - cls: 33.10 chg: -3.12 stop: n/a

Wow! The volatility index spiked to 42.16 midday when the market was sinking to new lows. The VIX hasn't traded that high since October 2002. When the market reversed the VIX started deflating rapidly. If this was a stock it looks like a clear "blow-off top" pattern. It's not too late to open bearish positions with October or November puts. 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: + 2.80
Earnings Date 00/00/00
Average Daily Volume = --- million

Strangle Updates


Dropped Calls

Ultra Dow 30 ProShares - DDM - cls: 55.60 chg: +2.81 stop: *
Ultra S&P 500 ProShares - SSO - cls: 53.17 chg: +3.17 stop:

Thursday proved to be another crazy day on Wall Street. Actions by the fed to inject liquidity into the system and hopes that there might be a real solution to the credit crisis helped fuel a massive rebound in stocks. If you followed our play on DDM things didn't turn out quite the way we planned.

We were expecting more weakness before bouncing higher and that is what we got. Our strategy last night was to buy calls on the DDM at 11:00 a.m. (actually it was between 10:30 and noon based on the market's performance I picked 11:00 a.m. for the newsletter last night). The DDM started trading at $53.15 at 11:00 a.m. Our strategy called for a 5% stop loss under our entry price, which would have been $50.49. The DDM slipped to $51.12 before surging to an intraday high of $57.06. Our first target was a 10% gain or $58.46. Things are looking pretty good right?

Not so fast! Our play description last night was very specific regarding the option spreads. As of yesterday the option spreads on DDM were untradable at least where they closed on Sept. 17th. The option spreads did improve significantly but they were still horribly wide. My comments were to NOT buy the DDM calls if the spreads were wider than $1.00 and unfortunately, they were (and still are). If the spreads were too wide we were to switch to calls on the SSO, which is the S&P 500 double-long ETF.

The SSO began trading at $50.16 at 11:00 a.m. A 10% gain would have been $55.18. The SSO hit $54.19 this afternoon. The situation looks pretty good, right? Unfortunately, after our 11:00 a.m. entry point at $50.16, a 5% stop loss would have been $47.65. The SSO dipped to $47.50 midday. We would have been stopped out at the very bottom of the sell-off.

This play is closed for us but the move today certainly looks like a potential bottom and speculative traders could try again. Look for a little bit of profit taking on today's huge bounce and then open bullish positions.

Picked on September 18 at $ See play description/stopped out
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 3.1 million

Dropped Puts

Lamar Advertising - LAMR - cls: 35.87 chg: +1.02 stop: 37.55

LAMR dipped to $33.14 before participating in the market's massive afternoon bounce. The rally started to struggle near $36.50. Volume was very big on today's session. The intraday chart looks like LAMR could roll over from here but given this market environment we're hitting the eject button! Time to exit. We'd rather be safe than sorry.

Picked on September 15 at $ 35.90 *triggered
Change since picked: - 0.03
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 1.4 million

Dropped Strangles


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