FYI: Check out these stocks. WYNN delivered an interesting bounce this afternoon. This might be a bullish entry point but use a stop under today's low. FCX was a big winner today. I would not chase it. A dip back toward $30.00 would be a big entry point to buy calls. STRA has been screaming higher but today's session looks like a big bearish reversal. This looks like an aggressive entry point to buy puts.
Apple Inc. - AAPL - close: 110.99 change: +4.03 stop: 99.45*new*
We do not want to chase the action in AAPL but we are going to adjust our entry point strategy. Our new entry point to buy calls on AAPL is a dip into the $106.00-104.00 zone. We'll up the stop loss to $99.45. If triggered at $106.00 our first target is $118.00 where we would exit the majority of our position. The $120 level and the 50-dma near $123 could be tough overhead resistance to break. We will tentatively set a secondary target at $124.00.
Burlington Northern - BNI - cls: 91.60 chg: +4.16 stop: 86.65*new*
Railroad stocks delivered a strong session with the DJUSRR index up more than 5.4%. BNI almost kept pace with the sector adding 4.7% and closing above round-number resistance at $90.00. One potential negative was how the rally in BNI stalled right on the 50-dma near $91.50. We are not suggesting new bullish positions at this time. Instead we would strongly consider an early exit right here to take some money off the table. We're raising our stop loss to $86.65. Our target remains the $94.00 mark.
CSX Corp. - CSX - close: 46.90 chg: +1.89 stop: 43.45
CSX also under performed the railroad index with a meager 4.1% gain. Shares of CSX remain under short-term resistance at 47.50 but the trend is certainly bullish. Our target remains unchanged at $49.90. We would seriously consider taking some money off the table with our 1st position in CSX (+6.49).
FYI: CSX is due to present at a Goldman Sachs Industrials conference on November 5th.
Lockheed Martin - LMT - close: 85.91 change: +1.93 stop: 78.79*new*
We are going to remain patient and let LMT come to us. However, we will adjust our suggested entry point to buy calls from $81-80 to $82.75-82.00. We'll up our stop loss to $78.79, which is just under the Oct. 30th low. If triggered at $82.75 Our target is the $89.50 mark.
Energy SPDR - XLE - close: 53.02 chg: +3.21 stop: 47.25*new*
Crude oil prices rallied sharply and the XLE followed suit. The XLE surged 6.4% and set a new three-week high. We're adjusting our stop loss to $47.25. We're not suggesting new positions at this time. Our target is the $56.50 mark.
Volatility Index - VIX - cls: 47.73 chg: - 5.95 stop: n/a
Volatility in this market is still contracting and it's doing it very quickly. The VIX fell another 11% today. The low today was 44.25, which happened to be the 50-dma. The VIX is now down five out of the last six sessions.
Our October 8th position is now almost 10 points in the money. Readers may want to prepare for an exit soon.
We're not suggesting new positions in the VIX at this time but any significant spike higher could be used to sell November calls.
We have just under two and a half weeks left before November VIX options expire.
If the VIX is under your call's strike price at expiration (11/19/08) they'll expire at zero ($0.00) and you keep all the premium you sold it for.
Note: The VIX options, which are European style options, have a unique expiration date. 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.
CBOE Volatility Index - VIX - cls: 47.73 chg: - 5.95 stop: n/a
No surprises here. The VIX is falling fast with an 11% decline on Tuesday. We're not suggesting new positions at this time.
We don't see any changes from our prior comments on the VIX spread plays listed below.
Please see the CBOE website or our Sunday, October 12th play description for details on margin requirements for selling VIX options. Link:
Note: VIX options are European style options that settle for cash at expiration. Furthermore VIX options have unique expiration dates. 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 (date Oct. 12th):
We wanted to SELL the November 30 calls (opening price 10/13/08 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:
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: