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Call Updates

JPMorgan Chase - JPM - close: 45.90 change: -3.95 stop: 44.45

JPM was holding up pretty well and trading above round-number resistance at $50.00. That was until the post-vote sell-off began. JPM fell off a cliff and ended the day down 7.9%. Technically the move looks like a bearish engulfing candlestick pattern, which can be interpreted as a bearish reversal pattern. We still think that JPM will out perform the rest of the financials but where the sector goes from here is a good question. The short-selling ban on financials, which was extended last week, will be removed around midnight on Wednesday, October 8th. Some traders could be exiting ahead of what they see as potential selling pressure. A bounce from the $45.00 level can be used as another bullish entry point to buy calls but you may want to tighten your stop loss even further. Our first target is $53.00 and suggest readers exit 50% to 75% of their position at $53. Our secondary target is $57.50.

Suggested Options:
We're not suggesting new positions at this time but if JPM offers another entry point we'd use the November calls. October calls work too but they expire in two weeks.

Picked on September 30 at $ 46.70
Change since picked: - 0.80
Earnings Date 10/15/08 (unconfirmed)
Average Daily Volume = 50.6 million

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Wells Fargo - WFC - close: 34.56 change: -0.60 stop: 32.95

WFC was at the center of a dramatic merger story on Friday. The company announced a deal to buy all of rival Wachovia Bank (WB) in an all-stock deal that values WB at $15.1 billion. The move was a shock since WB had already been pledged to Citigroup (C) in a FDIC broker-deal last Monday. WFC was higher on the session following the news before eventually turning lower in the post-bailout vote sell-off. The stock has closed under $35.00 but found short-term support at its 20-dma. We already cautioned readers that technicals on WFC had been deteriorating and Friday's move is a bearish engulfing candlestick pattern. We were not playing WFC for its technical picture but on the expectation that after the bailout plan was passed those banks that are poised to take advantage of the new financial landscape would surge higher. Stocks in general saw a sell-the-news move, which doesn't bode well for the banks. More conservative traders will want to consider an early exit now or raising their stop loss toward $34.00. We are not suggesting new bullish positions at this time. We have been using a very wide stop loss because the financials are so volatile. Our first target was the $42.50 mark and suggest readers sell 50% to 75% of their position there. Our secondary target was $47.50.

Suggested Options:
We are not suggesting new positions at this time.

Picked on September 30 at $ 37.53
Change since picked: - 2.97
Earnings Date 10/16/08 (unconfirmed)
Average Daily Volume = 54.5 million
 

Put Updates

Sears Holding - SHLD - cls: 87.32 chg: -0.29 stop: 95.15

Several of the big retail stocks turned sharply lower on Friday. SHLD was not one of them. The stock bounced sideways between technical support at its 100-dma and short-term resistance at the $90.00 level. We see Friday's failed rally under $90.00 as another entry point to buy puts. The fourth quarter is not looking very good. Unemployment is rising. Consumer spending is falling. A lot of retailers are having trouble getting credit to buy inventory for the holiday season. As one of the larger retailers we don't see SHLD at risk for not getting credit but it might cost them more and they should suffer from the economic slow down. SHLD has showed some support at $85.00 in the past so don't be surprised to see an oversold bounce. We have two targets. Our first target is $81.00. Our second target is $76.00. The Point & Figure chart is bearish with a $77 target.

Suggested Options:
We are suggesting the November puts.

Picked on October 01 at $ 89.04
Change since picked: - 1.72
Earnings Date 11/28/08 (unconfirmed)
Average Daily Volume = 3.1 million

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Volatility Index - VIX - cls: 45.14 chg: - 0.12 stop: n/a

The sell-the-news reaction to the bailout vote in Washington caught many market participants by surprise and fear began to rise again. The VIX remains at very elevated levels. We would still consider buying November puts in the 45-50 zone. Very short-term and nimble traders might consider buying some short-term calls with a target in the 49-50 region. Our September 16th put position (suggested entry at 30.30) has a 25.50 target. The September 29th position (suggested entry at 46.72) has two targets at 36.00 and 31.00.

Suggested Options:
Look for another failed rally type of move before buying November puts.

Picked on September 16 at = 30.30 first position
Change since picked: +14.84
Picked again Sept. 29 at = 46.72 second position
Changed since picked: -1.58
Earnings Date 00/00/00
Average Daily Volume = --- million

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Whirlpool - WHR - close: 71.13 change: -5.25 stop: 80.01 *new*

Target achieved. As investors look ahead to the slowing economic outlook stocks were hammered lower on Friday. WHR lost another 6.8% and broke through potential support at the 100-dma and the $72.50 region. Our first target was $75.25. WHR is very close to our second target at $70.25. We're adjusting our stop loss to $80.01. We're not suggesting new positions at this time but another failed rally in the $78-80 zone could be another entry point for puts again.

Suggested Options:
We are not suggesting new positions in WHR at this time.

Picked on October 01 at $ 83.00 *triggered 10/01
Change since picked: -11.87
Earnings Date 10/23/08 (unconfirmed)
Average Daily Volume = 1.6 million
 

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

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Financial Sector SPDR - XLF - cls: 18.78 chg: -0.86 stop: n/a

XLF traded on both sides of our suggested entry range (19.50-20.50) so we had multiple opportunities to open up a strangle position. We're not suggesting new positions at this time unless the XLF sees another bounce back toward the 20.00 zone. This is a two-week bet that financials see some big movement following the approval of the bailout bill. We suggested the October $22.00 call (XLF-JV) and the October $18.00 put (XLF-VR). Our estimated cost was $1.54. We want to sell if either option hits $2.25.

Suggested Options:
We are not suggesting new positions at this time.

Picked on October 02 at $ 19.64
Change since picked: - 0.86
Earnings Date 00/00/00
Average Daily Volume = 222 million
 

Dropped Calls

Apple Inc. - AAPL - close: 100.10 chg: - 9.02 stop: 97.45

We were off to a good start on Friday morning. AAPL gapped open higher at $104.00 and traded over $106 before suddenly plunging under $95 a share. Investors reacted sharply to a "news" item by a CNN iReport that Steve Jobs had been rushed to the hospital following a heart attack. The story was false and odds are good that the SEC will be investigating the news and timing for potential fraud. Of course that doesn't help us. We were stopped out at $97.45. Even after it was revealed that the story was fake shares of AAPL eventually faded from its afternoon bounce and closed under $97.00.

Picked on October 02 at $102.50 /stopped out 97.45
Change since picked: - 2.40
Earnings Date 10/22/08 (unconfirmed)
Average Daily Volume = 28.5 million
 

Dropped Puts

None
 

Dropped Strangles

None
 

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