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Call Updates

CSX Corp. - CSX - close: 43.74 chg: +0.18 stop: 39.90

We were looking for a dip in CSX into the $40.50-40.00 zone. Thursday's market weakness was strong enough to push CSX to $40.69 before the big afternoon bounce back. I do think CSX can bounce from here but we would have preferred a much better entry point and stop loss. We will open bullish positions here with a stop loss at $39.90. More conservative traders may want to use a tighter stop. Our first target is $49.90. Rivals UNP and BNI both reported earnings today and the results were better than expected, which should bolster the railroad sector.

Picked on October 23 at $ 43.74
Change since picked: + 0.00
Earnings Date 10/14/08 (confirmed)
Average Daily Volume = 6.5 million

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Hansen Natural - HANS - close: 22.88 change: -0.52 stop: 19.90*new*

We are going to update our entry point on HANS. We had been waiting for a dip into the $20.65-20.00 zone but it looks like that may not happen. Shares dipped to last week's support near $21.50 instead and bounced higher. This remains an aggressive play given how wide our stop loss is. We're going to suggest readers buy calls on today's afternoon bounce. We'll use a stop loss at $19.95. More conservative traders will want to strongly consider a stop loss around $21.40 instead. Our first target is $26.85. Our secondary target is $30.00.

Picked on October 23 at $ 22.88
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: 48.99 chg: -1.52 stop: 46.45*new*

The small cap Russell 2000 index under performed the rest of the market but managed a bounce near its October lows as we expected. Shares of the IWM slipped to $46.68 before rebounding. Our suggested entry point was $48.50. The play is now open. We are going to tighten up our stop loss to $46.45. We have 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 23 at $ 48.50 *triggered
Change since picked: + 0.49
Earnings Date 00/00/00
Average Daily Volume = 123 million

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MasterCard - MA - close: 136.00 chg: - 4.93 stop: 118.99

Our play on MA is working out perfectly. The stock dipped to $130.56 and bounced. Our suggested entry point was a drop into the $131.00-120.00 zone. The play is now open. For the moment we're going to keep our wide, aggressive stop loss at $118.99 because MA can be so volatile. However, more conservative traders will want to strongly consider a tighter stop near $130 maybe $129 instead. We have two targets. Our first target is $158.00. Our second target is $169.50.

Picked on October 23 at $131.00 *triggered
Change since picked: + 5.00
Earnings Date 11/03/08 (confirmed)
Average Daily Volume = 3.8 million

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Energy SPDR - XLE - close: 46.55 chg: +2.35 stop: 37.45

Hmm... we were expecting a dip in the energy sector toward the October lows. Instead the energy sector displayed some relative strength. The XLE traded near $42.30 and then rebounded to a 5% gain. More nimble traders may want to open bullish plays above $47.00. We're going to stick to our $40.50-39.00 entry point for now but we might adjust our entry if we see XLE nearing a breakout past $51.00 instead. If triggered we're setting two targets. Our first target is $45.00. Our second target is $49.75.

Picked on October xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 47.7 million
 

Put Updates

Volatility Index - VIX - cls: 67.80 chg: - 1.85 stop: n/a

Thursday was another incredibly volatile day for both stocks and the VIX. First thing this morning there was a bad tick on the VIX that put the intraday high over 96.00 today. The actual high was closer to 80.00 this afternoon before stocks reversed and the VIX turned lower. Yesterday I suggested that aggressive traders may want to just sell the November 80 calls (or higher strikes) if the VIX nears 80 again. Those Nov. 80 calls were trading around $1.50 late this afternoon. Right now you could sell the 70s for about $2.00. If the VIX closes under these strikes at expiration the calls will expire at zero.

Yesterday we added another spread trade and today's spike higher provided a great entry point to open the position. See the VIX spread update in the strangle section.

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: +37.50
Picked again Sept. 29 at = 46.72 second position
Changed since picked: +21.08
Picked again Octo. 08 at = 57.53 third position
Changed since picked: +10.27
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: 67.80 chg: - 1.85 stop: n/a

Another spike to 80.00 on the VIX provided another great entry point to sell some options. We don't see any changes from our previous comments.

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
Update 10/23/08 open 17.50, high 21.40, closed 20.30bid

-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
Update 10/23/08 open 5.70, high 7.70, closed 7.30ask

Picked on October 12 at $ 69.95
Change since picked: - 2.15

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

We wanted to SELL the November 35 calls (10/23/08 opening price was $ 14.00) and BUY the November 60 (10/23/08 opening price was $3.00) 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
Update 10/23/08 open 14.00, high 17.00, closed 15.30bid

-and-
BUY CALL NOV 60.00 VIX-KN
Wednesday 10/22/08 closed at 3.70 ask
Update 10/23/08 open 3.00, high 4.50, closed 4.10ask

Picked on October 12 at $ 69.65
Change since picked: - 1.85
 

Dropped Calls

DIAMONDS - DIA - close: 87.99 change: +2.49 stop: 74.40

The NASDAQ and the Russell small cap index both retested their October lows. The S&P 500 came close. The DJIA was not quite as weak. Maybe that's a sign of relative strength. While I suspect that the market will move higher from here I don't want to chase the afternoon bounce in the DIA. You could but you'd need to put a stop loss under today's low. We're going to remove the DIA from the play list until we see another entry point. Our plan had been to buy calls on a dip into the $80.25-79.00 zone.

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

Dropped Puts

Alliant Tech - ATK - close: 77.27 change: -0.80 stop: 83.05

Target achieved. ATK sold off sharply midday and hit $74.00. Our target to exit was $74.50. The big bounce from the test of its October lows could be considered a bullish double-bottom pattern.

Picked on October 22 at $ 79.75 *target hit 74.50
Change since picked: - 2.48
Earnings Date 10/30/08 (confirmed)
Average Daily Volume = 340 thousand

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CSX Corp. - CSX - close: 43.74 change: +0.18 stop: 45.55

It is time to exit our CSX put play. We were aiming for $40.50. The stock dipped to $40.69 and rebounded sharply. Rival railroads BNI and UNP both reported better than expected earnings today. CSX is now a call position in the call section of the newsletter.

Picked on October 21 at $ 45.07 /early exit
Change since picked: - 1.33
Earnings Date 10/14/08 (confirmed)
Average Daily Volume = 6.9 million

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Ultra Dow30 ProShares - DDM - cls: 33.93 chg: +1.51 stop: 36.30

Target exceeded. The DDM, which is the ultra-long DJIA etf slipped to $29.93 before bouncing back. Our target to exit was the $30.50-30.00 zone. Nimble traders may want to switch to bullish positions here.

Picked on October 21 at $ 34.34 /gap open entry/Target hit 30.50
Change since picked: - 0.41 /originally listed at 36.27
Earnings Date 00/00/00
Average Daily Volume = 6.9 million

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Energizer Holdings - ENR - close: 53.50 chg: -2.35 stop: 61.65

Target achieved. Shares of ENR dipped to $51.03 before bouncing back. Our suggested entry point to exit was the $52.00-50.00 zone.

Picked on October 21 at $ 57.62 /gap down entry/target hit
Change since picked: - 4.12 /originally listed at 58.40
Earnings Date 10/30/08 (confirmed)
Average Daily Volume = 838 thousand

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Monsanto - MON - close: 74.91 chg: -3.49 stop: 90.15

It's time to get out of our MON put play. Yesterday the stock hit our first target at $76.00. Today shares dipped to $71.00 before bouncing back. Our secondary target was $70.50. It was a close call but not close enough.

Picked on October 21 at $ 82.10 /gap down entry/1st target hit
Change since picked: - 7.19 /originally listed at 85.38
Earnings Date 12/31/08 (unconfirmed)
Average Daily Volume = 10.3 million
 

Dropped Strangles

None
 

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