Editor's Note:

Good evening traders. Today's price action in the S&P 500 tested the will of traders with a short bias in the market. The index briefly peeked its head above yesterday's high and then spent the remainder of the day making lower highs and lower lows. It appears that a downward channel may be starting to form on the shorter term intraday charts, but the S&P 500 needs to make new lows below 1,199 early tomorrow for this statement to hold water. The futures were under pressure as of this writing on Wednesday evening. Often times when markets whipsaw back and forth it is a warning signal that a trend change may be happening. Whether the recent volatility is in fact warning us, or it is simply because of the earnings and news driven markets, has yet to be determined. Stay nimble with your position management.

We are hoping to exit our GT position tomorrow if it gets near our target. Our SPG short set-up failed so its time to step aside as our stop was hit today. We are intentionally keeping our portfolio narrow until we get a better sense of market direction. Staying on the sidelines is probably not a bad idea.

Current Portfolio:


CALL Play Updates

Diana Shipping Inc - DSX - close 15.15 change -0.02 stop 14.32

DSX retraced some the gains from Tuesday which triggered our entry to buy calls today. We our now long May $15.00 calls at $0.60 in the model portfolio. The stock traded as low as $14.96 but closed well off of its lows at $15.14. I am looking for the stock to follow through and test the highs from April 6 which is near our target of $15.65. A +50-cent move in the stock from here should garner about 30-cents in profit on our calls, which would represent a +50% gain. A second more aggressive target can be placed at $16.00. I envision this as a fairly quick trade lasting about one week. Our stop is $14.32 which is below Monday's low and all of the stocks moving averages.

Current Position: CALL MAY $15, entry at $0.60

Entry on April 21, at $ 0.60
Earnings Date 5/6/2010 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on April 20th, 2010


Goodyear Tire & Rubber Co. - GT - close 14.57 change +0.28 stop 13.50

GT had a nice day closing higher +1.82% on the day. Our GT $1.90 GT calls our now worth about $2.20, or +15%. The stock made highs at $14.66 this afternoon which is only $0.09 away from our target. Considering the whipsaws in the market over the past several days I am suggesting readers tighten stops or sell their positions to protect profits. The delta on our option is .87 which means for every 10-cent gain in GT, our call value should increase 8 or 9 cents. So if GT hits our target of $14.75 (18-cents higher than today's close) our options should be worth another 10 or 15 cents depending on the bid/ask spread and where you get filled. This would yield a gain of +20% on the position. So I pose the question of whether it is worth squeezing out this additional gain of +5%, or just sell now to protect profits. A strategy I would consider is placing a good til cancelled (GTC) sell order on the option at $2.25 and I would be surprised if it is not filled tomorrow, unless of course the stock gaps down and doesn't trade higher. We are looking to exit the trade if GT trades into the $14.70 to $14.75 area which is our target. A more aggressive target is $15.90 but GT has earnings on April 28 so I doubt there will be enough time. There is a key pivot level at $14.00 that I would expect to hold as support if there is any weakness in GT, but I would not let the stock reverse on you at this point. I am not recommending new positions at this time. Our time frame is now one or two days.

Current Position: Long MAY CALL $12.50, entry @ $1.90

Entry on April 20th at $ 1.90
Earnings Date 4/28/10
Average Daily Volume = 4.3 million
Listed on April 19th, 2010


PUT Play Updates

SPDR S&P 500 Index - SPY - close: 120.66 change: -0.22 stop: 123.05

Today's price action in the S&P 500 tested the will of traders short the market. The index briefly peeked its head above yesterday's high and then spent the remainder of the day making lower highs and lower lows. It appears that a downward channel may be developing on the shorter term intraday charts, but SPY will need to trade down below $120 early tomorrow for this statement to hold water. Often times when markets whipsaw back and forth it is a warning signal that a trend change may be happening. Whether the recent volatility is in fact warning us, or it is simply because of the earnings and news driven markets, has yet to be determined. But I am willing to see how the coming days play out prior to closing this position. There is resistance from last week just overhead and I still suspect SPY may retreat from here. Conservative traders should consider moving up their target to $118.85 which is just above Friday's low. Should SPY trade to this level I will be looking to exit the position. A second target could be $117.75. Our stop remains 123.05 which is just above SPY's 200-week SMA.

Current Position: SPY PUT MAY $119.00, entry at $2.05

Entry on April 13th at $ 2.05
Earnings Date Not Applicable
Average Daily Volume = 164 million
Listed on April 12th, 2010


CLOSED BEARISH PLAYS

Simon Property Group - SPG - close: 89.99 change: +2.33 stop: 86.35

SPG has rallied $5.00 (+6%) since Friday's lows and hit our stop today. Our set-up looked promising on Monday as the stock rallied right up to our short entry trigger and retreated. However, the set-up failed with the amazing follow through on Tuesday and Wednesday. We are out of the position for a 95-cent loss. I suggest readers who may still have positions to place a stop above today's highs and see if SPG turns back down in the coming days.

Closed Position: MAY PUT $80.00 @ $1.25, entry at $2.20.

Annotated Chart:

Entry on April 19th at $ 83.75
Earnings Date 4/30/2010
Average Daily Volume = 2.6 million
Listed on April 17th, 2010