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Call Updates

CSX Corp. - CSX - close: 45.07 chg: -0.50 stop: 37.99

Bulls and bears have to admit that CSX out performed the broader market. Instead of losing 3% like the S&P 500, shares of CSX only lost 1%. However, I wouldn't be too bullish. The intraday action looks like a short-term bearish double top pattern. We are sticking with our plan to buy a dip near $40.00. Actually, given today's performance, we're going to try and scalp the ride down with some short-term puts (see our new plays tonight). If CSX does dip toward $40.00 we're suggesting readers buy calls in the $40.50-40.00 zone. If triggered at $40.50 we have two targets. Our first target is $45.00. Our second target is $48.00. Traders need to be aware that two of CSX's rivals, BNI and UNP both report earnings on October 23rd this week. Their earnings news and guidance could have a big impact on CSX's performance.

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/14/08 (confirmed)
Average Daily Volume = 6.5 million

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DIAMONDS - DIA - close: 90.38 change: -2.90 stop: 74.40

The market failed to build on yesterday's gains. Intraday most of the major indices created a short-term bearish double top pattern. We're going to stick to our plan to buy a dip in the DIA in the $80.25-79.00 zone. If the DIA hits our trigger to buy calls at $80.25 our first upside target is $88.50. Our second target is $94.50. More conservative traders may want to use a stop loss much tighter than our stop at 74.40.

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 30 million

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Hansen Natural - HANS - close: 24.10 change: -1.05 stop: 18.95

It's been a very volatile week for HANS. In the last two days the stock has rallied from $22.00 to almost $27.00 this morning and now back to $24. I still think HANS has a good chance to retest the lows near $20. We are suggesting readers buy calls on a dip into the $20.65-20.00 zone. If we are triggered at $20.65 then our target to exit the calls is at $24.50 and then $27.50.

FYI: More nimble traders might want to try and scalp a couple of points in HANS on the way down toward $20.00. Plus, if HANS continues to fall and hits our stop loss at $18.95 we would strongly consider buying puts and aiming for $15.00.

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 10.6 million

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iShares Russ.2000 - IWM - cls: 53.18 chg: -1.51 stop: 44.90

The Russell 2000 small cap index kept pace with the S&P 500 and delivered a 3% loss today. The IWM etf only lost 2.7%. The trend is certainly negative. Right now we're waiting to buy calls on a dip into the $48.50-45.00 zone although we may have to reconsider if we see another bounce from the $50.00 level. If triggered at $48.50 we're listing two targets. Our first target is $54.50, which could be hit in just a few days. Our second target is $58.00, which might take a few weeks.

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 123 million

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MasterCard - MA - close: 149.78 chg: - 0.36 stop: 118.99

If you're just looking at the final numbers today then MA did pretty well compared to the S&P 500. MA only lost 0.2%. Yet the intraday moves are growing more and more bearish. A dip towards $130ish seems more and more likely. We are going to withdraw our Trade #1, which was to buy calls on a dip in the $141-140 zone. We will stick with our planned Trade #2, which is to buy calls on a dip in the $131.00-120.00 zone. Our first target is $158.00. Our second target is $169.50.

Last Thursday I suggested a couple of alternative strategies. One was a covered call play. Today I would look for the dip to $140ish and then consider buying the stock and selling some calls. The second alternative was selling the puts. Look for the dip toward $140 and then sell puts to collect the premium but only if you're happy to own the stock. You could sell the November $140s puts for about $15.00 if MA nears $140. The January $140s puts will probably be over $20 if MA nears $140. You still need an exit plan if MA continues to drop!

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/03/08 (confirmed)
Average Daily Volume = 3.8 million
 

Put Updates

Volatility Index - VIX - cls: 53.11 chg: + 0.14 stop: n/a

Today was the last day for trading October VIX options. Most of our suggested plays on the VIX involve the November 2008 options. If stocks are poised to move lower tomorrow then the VIX will most likely bounce and retrace some of Monday's huge drop. We're not suggesting new put positions at this time.

Note: The VIX options, which are European style options, have a unique expiration date. October VIX options expire on October 22nd, 2008. November VIX options expire on November 19th, 2008. The last day of trading for these options is the Tuesday before expiration. For more information check this link.

Our September 16th put position (suggested entry at 30.30) has a 25.50 target. In all honesty this position may be dead. We still have plenty of time with these next two. The September 29th position (suggested entry at 46.72) has two targets at 36.00 and 31.00. Our October 8th position (entry 57.53) has two targets at 40.00 and 35.00.

Picked on September 16 at = 30.30 first position
Change since picked: +22.81
Picked again Sept. 29 at = 46.72 second position
Changed since picked: + 6.39
Picked again Octo. 08 at = 57.53 third position
Changed since picked: - 4.42
Earnings Date 00/00/00
Average Daily Volume = --- 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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CBOE Volatility Index - VIX - cls: 53.11 chg: + 0.14 stop: n/a

Our spread using October options is now over. Today was the last day. If you were able to exit near the VIX's lows today then the loss on the play would have been $1.00 (per option) on the October $40 calls. If you let it expire then we are setting at a $3.00 loss. If you opened positions later than Monday, October 13th then you should have made a small profit.

Our November trade is setting up pretty well, especially if you opened positions after Monday, Oct. 13th. We're not suggesting new positions at this time.

Summary:

Please see the CBOE website or our Sunday, October 12th play description for details on margin requires for selling VIX options.

Note: VIX options are European style options that settle for cash at expiration. Furthermore VIX options have unique expiration dates. October options expire on Wednesday, October 22, 2008 and will stop trading on Tuesday, Oct. 21. November options expire on Wednesday, November 19, 2008 and will stop trading on Tuesday, November 18th.

VIX spread #2 with November options:

We wanted to SELL the November 30 calls (opening price was $ 8.60) and BUY the November 50 (opening price was $1.61) as a hedge against the VIX remaining elevated.

In a different format the play is:

SELL CALL NOV 30.00 VIX-KF.
Monday 10/13/08 open 8.60, high 9.80, closed 8.40
Update 10/15/08 open 10.00, high 13.00, closed 13.00
Update 10/16/08 open 13.70, high 16.20, closed 13.25
Update 10/17/08 open 15.55, high 17.70, closed 17.50bid
Update 10/20/08 open 16.30, high 17.20, closed 15.00bid
Update 10/21/08 open -----, high 15.50, closed 14.40bid

-and-
BUY CALL NOV 50.00 VIX-KJ.
Monday 10/13/08 open 1.61, high 2.10, closed 1.50
Update 10/15/08 open 2.00, high 3.60, closed 3.60
Update 10/16/08 open 3.70, high 5.50, closed 3.65
Update 10/17/08 open 4.50, high 5.30, closed 5.50ask
Update 10/20/08 open 3.90, high 5.30, closed 4.40ask
Update 10/21/08 open ----, high 4.70, closed 3.80ask

Picked on October 12 at $ 69.95
Change since picked: -16.84
Earnings Date 00/00/00
Average Daily Volume = ---
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

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