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Call Updates

CSX Corp. - CSX - close: 43.56 chg: -1.51 stop: 37.99

Railroads were not immune to the sell-off but the railroad index did perform better than the S&P 500. CSX was not quite so lucky and shares lost 3.3% by the closing bell, while paring its losses with a quick bounce before the close. Volume appears to be very light on CSX's decline, which might be considered somewhat bullish. The intraday low was $41.43. We are still waiting for CSX to hit our entry point. 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: 85.50 change: -4.88 stop: 74.40

The DJIA is pulling back as we expected. We're still waiting for our entry point. We are suggesting that traders 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: 23.40 change: -0.70 stop: 18.95

HANS actually out performed the S&P 500 with the beverage company's stock only falling 2.5%. We're still expecting a dip toward $20.00. 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.

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: 50.49 chg: -2.69 stop: 44.90

The Russell 2000 small cap index suffered a rough 5.4% loss and the IWM almost kept pace with a 5% decline of its own. The low for the IWM today was $49.31. We suspect that stocks will bounce when they hit their October lows. Right now we're suggesting readers buy calls on the IWM in the $48.50-45.00 zone. More conservative traders will certainly want to wait for the IWM to near the lower end of that entry range before initiating positions. 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: 140.93 chg: - 8.85 stop: 118.99

We're being tested now on our decision to yank the $140 entry point on MA. The stock slipped to $134.96 (-$14.82 at its low) before bouncing back above $140. Last night we deleted the suggested entry to buy calls on MA at $141 and stuck to our lower entry point to buy calls on a dip into the $131.00-120.00 zone instead. Given the market's weakness odds are definitely growing that MA will hit new relative lows. If triggered at $131.00 we have two targets. Our first target is $158.00. Our second target is $169.50.

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

Alliant Tech - ATK - close: 78.07 change: -3.32 stop: 83.05

We did not have to wait very long for ATK to hit our trigger to buy puts. The stock gapped down to open at $80.16 and then hit our trigger at $79.75. If you missed the entry point look for a failed rally near $80.00 or even a failed rally in the $82.00 region as a new entry point to buy puts. Our target is the 74.50 mark, just above the October low. We do not want to hold over the late October earnings report.

Picked on October 22 at $ 79.75 *triggered
Change since picked: - 1.68
Earnings Date 10/30/08 (confirmed)
Average Daily Volume = 340 thousand

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CSX Corp. - CSX - close: 43.56 change: -1.51 stop: 45.55*new*

CSX under performed its peers in the railroad sector. The stock lost 3.3% and dipped to $41.43 intraday. Our exit target is $40.50 where we would take profits on this put play and switch to buying calls (see our call section). We are reducing the stop loss to $45.55, just above today's high.

Picked on October 21 at $ 45.07
Change since picked: - 1.51
Earnings Date 10/14/08 (confirmed)
Average Daily Volume = 6.9 million

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Ultra Dow30 ProShares - DDM - cls: 32.42 chg: -3.85 stop: 36.30*new*

The DDM is certainly moving our direction. Unfortunately, this ultra-long ETF on the DJIA actually gapped down to open at $34.34. Shares dipped to $30.55 intraday. Our target is the $30.50-30.00 zone - so almost a winner on the first day! We are adjusting the stop loss to $36.30. More conservative traders may want to tighten their stops closer to $35.00 or even toward today's high instead (34.66). We are not suggesting new positions at this time.

Picked on October 21 at $ 34.34 /gap open entry/
Change since picked: + 0.00 /originally listed at 36.27
Earnings Date 00/00/00
Average Daily Volume = 6.9 million

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Energizer Holdings - ENR - close: 55.85 chg: -2.55 stop: 61.65

ENR continued lower as we expected but shares gapped open lower at $57.62. The intraday low was $54.64. More conservative traders may want to start thinking about a tighter stop loss already. Another failed rally in the $58.50-60.00 zone could be used as another entry point if you missed this morning. Our target is the $52.00-50.00 zone. We do not want to hold over the late October earnings report.

Picked on October 21 at $ 57.62 /gap down entry/
Change since picked: + 0.00 /originally listed at 58.40
Earnings Date 10/30/08 (confirmed)
Average Daily Volume = 838 thousand

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Monsanto - MON - close: 78.40 chg: -6.98 stop: 90.15

First target achieved. We were expecting some sharp moves lower for MON and shares gave up more than 8% today. Unfortunately, our play started with a gap down entry at $82.10 this morning. The low today was 75.86, which is good enough to hit our first target at $76.00. We're not suggesting new positions at this time but a failed rally under $85.00 is a good spot to look for another entry point. Our second target is the $70.50 mark. Be advised that MON could see a lot of volatility on Thursday following a couple of earnings reports from rivals in the sector.

Picked on October 21 at $ 82.10 /gap down entry/1st target hit
Change since picked: + 0.00 /originally listed at 85.38
Earnings Date 12/31/08 (unconfirmed)
Average Daily Volume = million

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Volatility Index - VIX - cls: 69.65 chg: +16.54 stop: n/a

Another multi-hundred point drop in the DJIA and a 6% loss in the S&P 500 lifted the VIX to a 31% gain. The intraday high appears to be in the high 70s not the 81.45 some quote services display. Moves of this magnitude in the VIX are simply amazing. Another way to play this extreme volatility might be to sell calls. Think about it. The VIX is at super extreme levels right now and it's unheard of that it has been able to last this long (about three weeks above 60). What are the odds it will last another four weeks? If the VIX spiked toward 80 again more aggressive traders may want to start selling 80 (or higher) strike price November calls. If the VIX closes under 80 at November expiration the calls will settle at zero.

We are not suggesting readers buy new puts at this time. With volatility this high the option prices are outrageous.

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: +39.35
Picked again Sept. 29 at = 46.72 second position
Changed since picked: +22.93
Picked again Octo. 08 at = 57.53 third position
Changed since picked: +12.12
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: 69.65 chg: +16.54 stop: n/a

This extreme spike back toward 70 and beyond in the VIX is another entry point to sell the November spread. We're marking this down as a new position except this time we'll sell the November 35 calls and buy the November 60s. See the details below.

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 #1 has been completed.

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
Update 10/22/08 open 16.40, high 19.20, closed 18.10bid

-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
Update 10/22/08 open 4.30, high 6.60, closed 6.40ask

Picked on October 12 at $ 69.95
Change since picked: - 0.30

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VIX spread #3 with November options (published 10/22/08):

We wanted to SELL the November 35 calls (opening price was $ x.xx) and BUY the November 60 (opening price was $x.xx) as a hedge against the VIX remaining elevated. We'll fill in the prices Thursday morning. Our account will be credited with the amount for selling the November 35 calls, while it the price paid for the 60 calls will be deducted.

In a different format the play is:

SELL CALL NOV 35.00 VIX-KI
Wednesday 10/22/08 closed at 14.00 bid

-and-
BUY CALL NOV 60.00 VIX-KN
Wednesday 10/22/08 closed at 3.70 ask


Picked on October 12 at $ 69.65
Change since picked: - 0.00
 

Dropped Calls

None
 

Dropped Puts

None
 

Dropped Strangles

None
 

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