Option Investor
Play Updates

Watch those stops

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Play Editor's Note: We were expecting a correction in the stock market. However, to be honest, I was not expecting such a violent move down and all in one day. Both the DJIA and the S&P 500 have completed a 50% retracement of last week's gains. If bulls are going to buy the dip they need to do it soon. Otherwise we might need to plan on new lows for the year. Wait for signs of a bounce before considering new positions and I would use tight stops on any new entries.


CALL Play Updates

Amazon.com - AMZN - close: 40.47 change: -2.23 stop: 38.70

While AMZN was not immune to the widespread market sell-off the stock did not fall to a minus 5% decline until very late in the day. The intraday low was $40.38. Our plan was to buy calls on a pull back into the $40.50-40.00 zone. The play is now open.

The severity of the market correction on Monday was a lot worse than expected. More conservative traders may want to up their stop loss toward the $40.00 level. We're keeping ours at $38.70 for now.

We are listing two targets. Our first target is $44.50. Our second target is $48.50. FYI: The P&F chart recently produced a new buy signal with a $53 target.

Chart:
AMZN

Picked on December 01 at $ 40.50 *triggered     
Change since picked:      - 0.03
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =      12.7 million  


Apollo Group - APOL - close: 71.06 change: -5.78 stop: 69.90

Ouch! APOL was hammered lower just like the major indices. The stock suffered a painful -7.5% decline to erase almost all of last week's gains. APOL has now pulled back to prior resistance and what should be support near $71-70. Our plan was to buy calls on a dip into the $73.00-72.00 range. The play is now open. Our target is the $79.75 mark. FYI: The Point & Figure chart is bullish with a $99 target.

Chart:
APOL

Picked on December 01 at $ 73.00 *triggered     
Change since picked:      - 1.94
Earnings Date           01/06/09 (unconfirmed)
Average Daily Volume =       4.0 million  


Entergy Corp. - ETR - close: 81.14 change: -3.96 stop: 79.99

ETR was holding on to the $82 level and its 50-dma until the last 30 minutes of trading. That is when shares plunged to their lows and ended with a 4.6% drop. ETR looks poised to test the $80.00 level and we'll be in danger of getting stopped out. Even if we are stopped out at $79.99 I would keep an eye on ETR for a bounce from $80.00, which could prove to be a new bullish entry point albeit with a tight stop loss.

The P&F chart is bullish with a $104 target. We're setting two targets. Our first target to take profits is $92.50. Our secondary target is $97.50. Keep a wary eye on possible resistance at the 100-dma and exponential 200-dma overhead.

Picked on November 22 at $ 85.76
Change since picked:      - 4.62
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       2.3 million  


Lockheed Martin - LMT - close: 71.07 change: -6.04 stop: 69.90

LMT was caught up in the market's broad-based sell-off. Shares lost 7.8% and almost erased last week's gains. Our plan was to buy calls on a dip into the $73.50-72.00 zone so the play is now open. The concern now is are we going to get stopped out? LMT is on a crash course for round-number support at $70.00 and it may not hold. Wait for signs of a bounce before considering new positions.

We have two targets. Our first target is $78.50. Our second target is $81.50.

Chart:
LMT

Picked on December 01 at $ 73.50 *triggered     
Change since picked:      - 2.43
Earnings Date           01/22/09 (unconfirmed)
Average Daily Volume =       3.6 million  


PUT Play Updates

*Currently we do not have any put play updates*


Strangle & Spread Play Updates

SPDR GOLD Trust - GLD - close: 75.65 change: -4.66 stop: n/a

Nothing was safe today, not even gold. Another rise in the U.S. dollar and concerns over deflation send gold prices gapping lower. The GLD ended the day off 5.8%. We need to see directional movement and this drop takes a big bite out of the GLD's gains. We are not suggesting new strangle positions. December options expire in less than three weeks.

What is a strangle?
A strangle involves buying both an out-of-the-money call and an out-of-the-money put. We don't care what direction the stock goes as long as it moves one direction. If the stock moves far enough one side of our trade will rise in value and pay for the entire trade and make a profit.

-December Strangle-

Summary:
We suggested readers buy the December $75 call (GVD-LW) and the December $70 puts (GVD-XR). Our estimated cost was $6.30. We want to sell if either option hits $12.00.

Picked on November 09 at $ 72.50
Change since picked:      + 3.15
Earnings Date           00/00/00
Average Daily Volume =      19.3 million  


Ultra S&P500 ProShares - SSO - close: 22.00 change: -4.60 stop: n/a

Whoa! Talk about your roller coaster rides. The SSO was a big mover to the down side with a 17.3% drop. The momentum was all to the downside. We're not suggesting new strangles at this time. December options have less than three weeks before they expire.

Note: The SSO is an ultra-long ETF that typically moves twice the daily performance of the S&P 500 index.

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.

-December Strangle Details-
We suggested readers buy the December $30.00 call (SOJ-LD) and the December $20.00 put (SOJ-XT). Our estimated cost is $3.75. We want to sell if either option hits $6.00.

Picked on November 12 at $ 24.84
Change since picked:      - 2.84
Earnings Date           00/00/00
Average Daily Volume =       126 million  


CLOSED BULLISH PLAYS

DIAMONDS - DIA - close: 81.66 change: -6.64 stop: 81.90

I was expecting a pull back in the DJIA but I wasn't expecting a 7.7% drop in one day. The DIAMONDS (DIA) hit our trigger to buy calls at $84.00 and then continued to sink and hit our stop loss at $81.90 closing the play. We might reconsider a bullish play if the DJIA can bounce from the 8000 level.

Chart:
DIA

Picked on December 01 at $ 84.00 *triggered then stopped @ 81.90
Change since picked:      - 2.34
Earnings Date           00/00/00
Average Daily Volume =      48.5 million  


Intuitive Surgical - ISRG - close: 119.23 change: -13.30 stop: 119.99

ISRG gave up 10% and traded under the $120.00 level before the day was over. Shares hit our stop loss at $119.99 closing the play. Hopefully readers followed our suggests last week to take some profits above the $130 level. At the moment the stock looks ready to crash back toward its lows near $110.

Chart:
ISRG

Picked on November 25 at $120.25 /gap down entry point
Change since picked:      - 1.02 /originally listed at $124.39
Earnings Date           01/29/09 (unconfirmed)
Average Daily Volume =       1.4 million  


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