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Volatility Index - VIX - cls: 34.74 chg: +1.92 stop: n/a

The failure of congressional leaders to come together on a bailout plan raised investor concerns on Friday. The VIX gapped higher Friday morning and looks like it could be setting up for another spike toward 40.00 again. Another failed rally-type of pattern around 40.00 would be a new entry point to buy puts on the VIX. We are eliminating our second target at 21. While we are keeping the target at 25.50, if you're opening new put positions in the 36-40 zone you may want to set an early target at 30.50 to take some money off the table. I would expect the VIX to move sharply on Monday as the market reacts to any developments or lack thereof on the bailout plan. If you're opening new plays, use the November strikes.

Suggested Options:
Aggressive traders could still use October puts. We're suggesting November puts if the VIX offers another entry point.

Picked on September 16 at = 30.30
Change since picked: + 4.44
Earnings Date 00/00/00
Average Daily Volume = --- million

Strangle Updates


Dropped Calls

Allergan - AGN - close: 55.29 change: -2.09 stop: 55.29 *new*

On Thursday we were concerned that AGN's bounce might roll over under its 200-dma and we suggested readers considered an exit or raise your stop loss. We raised the stop to $55.29 and AGN quickly hit our stop on Friday morning. The action over the last few days has grown more and more bearish and if AGN trades under the early September lows it could portend a drop back to the $50.00 level.

Picked on September 21 at $ 58.68 /stopped out 55.29
Change since picked: - 3.39
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 2.4 million


Washington Mutual - WM - close: 0.16 change: -1.53 stop: n/a

WM has become the latest and one of the biggest casualties of the financial crisis on Wall Street. The company was the largest thrift in the nation and the Office of Thrift Supervision decided on Thursday night that WM's liquidity had become insufficient to meet its obligations. The government seized the company and its assets, handed it over to the FDIC who orchestrated an auction. The winner bidder was J.P. Morgan Chase who paid $1.9 billion for all of WM's deposits, assets, some liabilities, while also gaining its thousands of branches and employees. We warned readers that this was a speculative bet and our risk was the government stepping in. What surprised us was the speed at which WM suddenly took a turn for the worse. The company didn't even make it to bank-failure Friday when the government normally announces the failed banks it's taking over. It was only a few days ago that six different banks from around the world were looking at WM as a takeover candidate. We thought at least one of them would have been a bidder for the company.

Picked on September 21 at $ 4.25 /bankruptcy
Change since picked: - 4.09
Earnings Date 10/22/08 (unconfirmed)
Average Daily Volume = 113 million


SPDR S&P Oil - XOP - cls: 48.58 chg: -2.07 stop: 48.45

Both crude oil and the dollar spent most of Friday's session churning sideways. Yet the oil and oil service stocks hit some profit taking on Friday morning. The XOP dipped to $47.08 by lunchtime before paring its losses. On Thursday we had raised our stop loss to $48.45 so the play was closed early on. This ETF had hit our first target on September 19th.

Picked on September 16 at $ 46.70 /1st target hit 9/19/08
Change since picked: + 1.88
Earnings Date 00/00/00
Average Daily Volume = 2.0 million

Dropped Puts


Dropped Strangles


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