Editor's Note:

The S&P 500 index fell to its simple 200-dma on Friday as investors fret over the debt ceiling deadline.

AGU was stopped out. I have removed OTEX as candidate. CAT and QQQ have been opened. I am not suggesting new positions on the market neutral plays. Our TTC put play hit our final target.

-James

Current Portfolio:


CALL Play Updates

Alliance Data Systems - ADS - close: 98.34 change: -0.26

Stop Loss: 95.75
Target(s): 104.50. 107.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/30 update: Our trade on ADS is not open. Both the stock and the S&P 500 opened lower Friday morning. Our plan was to buy calls if they both opened higher. Shares of ADS spiked lower at the open on Friday, like many stocks did, and ADS tested support near $96.00 and rebounded. Volume was pretty light as investors wait for a resolution to the debt ceiling issue.

Shares of ADS are still outperforming the market. I am suggesting we try again. If ADS and the market open higher on Monday morning then we want to buy calls. Of course if there is a debt deal by lawmakers then the market and ADS could gap open higher. If there is not a deal then expect a gap open lower.

- Suggested Positions - If ADS & S&P 500 open higher on Monday.

buy the AUG $105 call (ADS1120H105)

- or -

buy the SEP $105 call (ADS1117I105)

07/30 Try again.
07/27 Try again. buy calls if ADS and S&P 500 open positive on Friday. New stop loss at $95.75
07/27 Our trade was not opened. I am removing our entry point (no trade) until Thursday night and we'll re-evaluate.

chart:

Entry on July xx at $ xx.xx
Earnings Date 07/21/11
Average Daily Volume = 825 thousand
Listed on July 26, 2011


Caterpillar Inc. - CAT - close: 98.79 change: -0.85

Stop Loss: 96.45
Target(s): 104.00, 109.00
Current Option Gain/Loss: - 1.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/30 update: Our aggressive trader on CAT is now open. Shares gapped open lower and dipped to $97.28 intraday. The stock almost closed under its simple 200-dma. The plan was to buy calls at the closing bell. We're expecting lawmakers to have a deal by Monday morning, which should send the markets higher on Monday.

I am setting our stop loss pretty close at $96.45. Aggressive traders will probably want their stop under $95.00 or under the June lows.

- Suggested (SMALL) Positions -

Long AUG $100 call (CAT1120H100) entry @ $2.90

chart:

Entry on July 29 at $98.79
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 8.7 million
Listed on July 28, 2011


PowerShares QQQ - QQQ - close: 58.00 change: -0.19

Stop Loss: 57.75
Target(s): 62.50, 64.75
Current Option Gain/Loss: - 9.6% & -30.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
07/30 update: Our new plan was to buy calls on the QQQ on Friday at the closing bell. Now all we need is for lawmakers to get their act together and come up with a deal that can pass before Monday morning. I am setting our stop loss at $56.75, just under the simple 50-dma. However, if there is no deal on Monday the Qs could gap open below our stop.

Earlier Comments:
This is an aggressive entry point. We wanted to keep our position size small to limit our risk.

- Suggested Positions - (SMALL POSITIONS)

Long AUG $60 call (QQQ1120H60) entry @ $0.52

- or -

Long AUG $62 call (QQQ1120H62) entry @ $0.13

07/29 Trade opened with QQQ closing at $58.00
07/28 New strategy: buy calls on Friday at the closing bell
07/27 We are removing our entry point for Thursday. We'll re-evaluate our strategy on Thursday night.

chart:

Entry on July 29 at $58.00
Earnings Date --/--/--
Average Daily Volume = 61.7 million
Listed on July 23, 2011


Market Neutral Play Updates

SPDR Dow Jones Industrial Average (ETF) - DIA - cls: 121.13 chg: -1.15

Stop Loss: n/a
Target(s): -----
Option Straddle Gain/Loss: + 2.6%
Option Strangle Gain/Loss: -12.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/30 update: The stock market plunged at the open on Friday morning and the DIA gapped open lower at $121.08. Shares danced around all day but after filling the morning gap the DIA settled near its opening price. I am not suggesting new positions at this time. The market is likely to gap open up or down come Monday morning depending if there is a debt ceiling deal or not.

Earlier Comments:
I'm listing both a straddle and a strangle. We're using August options that expire in less than four weeks. Readers may want to consider September options instead.

Trade #1. Option Straddle (cost: $4.49, current: $4.61)

Long AUG $123 call (DIA1120H123) Entry @ $2.33, current bid $1.46
- and also buy -
Long AUG $122 put (DIA1120T122) Entry @ $2.16, current bid $3.15

- or -

Trade #2. Option Strangle (cost: $1.64, current: $1.41)

Long AUG $127 call (DIA1120H127) Entry @ $0.64, current bid $0.33
- and also buy -
Long AUG $117 PUT (DIA1120T117) Entry @ $1.00*, current bid $1.10

07/30 No new positions at this time
07/28 we got much better prices than expected on the entry this morning.
07/28 *entry price is an estimate. option did not trade today
07/27 NOTE: you may want to buy three calls for every two puts if you're trading the strangle due to the price difference.

chart:

Entry on July 28 at $122.82
Earnings Date --/--/--
Average Daily Volume = 6.6 million
Listed on July 27, 2011


iShares Russell 2000 Index - IWM - close: 79.74 change: -0.10

Stop Loss: n/a
Target(s): --
Option Straddle Gain/Loss: - 8.8%
Option Strangle Gain/Loss: - 8.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/30 update: Friday was certainly a volatile day for small cap stocks but the IWM managed to recoup most of its losses. Shares saw an intraday decline under the simple and exponential 200-dma.

NOTE: There are two sets of August options on the CBOE website. One set expires on August 5th. The normal set that we want expires August 20th. I've always listed the Aug. 20th option symbols but on Thursday I listed the wrong values for our entry price, which have now been corrected.

I am not suggesting new positions at this time. The market is likely to gap open up or down come Monday morning depending if there is a debt ceiling deal or not.

Trade #1. Option Straddle (cost: $4.43, current: $4.04)

Long AUG $80 call (IWM1120H80) Entry @ $2.17, current bid $1.91
- and also buy -
Long AUG $80 put (IWM1120T80) Entry @ $2.26, current bid $2.13

- or -

Trade #2. Option Strangle (cost: $1.50, current: $1.38)

Long AUG $84 call (IWM1120H84) Entry @ $0.52, current bid $0.45
- and also buy -
Long AUG $76 PUT (IWM1120T76) Entry @ $0.98, current bid $0.93

07/30 no new positions at this time
07/30 corrected the entry price to reflect the correct Aug. options
07/27 NOTE: you may want to buy three calls for every two puts if you're trading the strangle due to the price difference.

chart:

Entry on July 28 at $79.96
Earnings Date --/--/--
Average Daily Volume = 60 million
Listed on July 27, 2011


SPDR S&P 500 ETF - SPY - close: 129.33 change: -0.89

Stop Loss: n/a
Target(s): --
Option Straddle Gain/Loss: - 1.5%
Option Strangle Gain/Loss: + 4.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/30 update: The SPY experienced a similar move with a sharp drop at the open, an intraday dip under the 200-dma, and then a bounce back. Unfortunately after filling the morning gap the ETF faded lower. The SPY is testing technical support at the 200-dma.

I am not suggesting new positions at this time. The market is likely to gap open up or down come Monday morning depending if there is a debt ceiling deal or not.

NOTE: There are two sets of August options on the CBOE website. One set expires on August 5th. The normal set that we want expires August 20th. I've always listed the Aug. 20th option symbols but on Thursday I listed the wrong values for our entry price, which have now been corrected.

Trade #1. Option Straddle (cost: $5.61, current: $5.37)

Long AUG $130 call (SPY1120H130) Entry @ $3.10 current bid $2.57
- and also buy -
Long AUG $130 put (SPY1120T130) Entry @ $2.51, current bid $2.80

- or -

Trade #2. Option Strangle (cost: $2.69, current: $2.67)

Long AUG $134 call (SPY1120H134) Entry @ $1.14, current bid $0.86
- and also buy -
Long AUG $127 PUT (SPY1120T127) Entry @ $1.55, current bid $1.81

07/30 no new positions at this time
07/30 corrected the entry price for August options
07/28 NOTE: you may want to buy three calls for every two puts if you're trading the strangle due to the price difference.

chart:

Entry on July 28 at $130.60
Earnings Date --/--/--
Average Daily Volume = xxx million
Listed on July 27, 2011


PUT Play Updates

FactSet Research - FDS - close: 92.09 change: -0.70

Stop Loss: 97.05
Target(s): 90.50, 86.00
Current Option Gain/Loss: + 5.7% & + 0.0%
2nd Position Gain/Loss: +27.5% Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
07/30 update: Hmm... the downward momentum in FDS is slowing. Shares only dipped to $91.18 on Friday morning while the rest of the market was plunging. Friday's widespread market weakness would have been a great excuse to sell FDS, at least down toward the $90 level. That did not happen. on top of that volume has been strong two days in a row without any serious movement in the stock. Elsewhere in the market volumes are down because traders are waiting for a resolution to the debt deal.

More conservative traders may want to consider an early exit based on the lack of movement. However, Monday morning is going to be a volatile one. The market and FDS is likely to gap open, up or down. Cautious traders may want to lower their stop loss instead. I am not suggesting new positions at this time.

Earlier Comments:
Our targets are $90.50 and $86.00 but the $90.00 level is support and FDS will probably see a bounce from this level. The Point & Figure chart for FDS is bearish with a $64 target.

- Suggested (SMALL) Positions -

Long AUG $95 PUT (FDS1120T95) Entry @ $3.50

- or -

Long SEP $90 PUT (FDS1117U90) Entry @ $2.40

- 2nd Position, listed 7/26 -

Long Aug $95 PUT (FDS1120T95) Entry @ $2.90*

07/27 new stop loss @ 97.05
07/27 entry on the 2nd position (Aug.95 put) is an estimate
07/26 New stop loss @ 98.25, Adding positions

chart:

Entry on July 18 at $94.48
Earnings Date 09/21/11 (unconfirmed)
Average Daily Volume = 363 thousand
Listed on July 16, 2011


CLOSED BULLISH PLAYS

Agrium Inc. - AGU - close: 87.38 change: -1.21

Stop Loss: 87.75
Target(s): 94.00, 98.00
Current Option Gain/Loss: -57.4% & -62.7%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
07/30 update: Shares of AGU were weaker than expected on Friday morning. The market's opening weakness prompted AGU to gap open lower at $87.37 and then plunged to $85.02 Friday morning. Shares eventually trimmed their losses. Our stop loss was at $87.75 so the gap open under our stop immediately closed this trade.

- Suggested Positions -

AUG $90 call (AGU1120H90) Entry @ $2.70, Exit $1.15 (-57.4%)

- or -

AUG $95 call (AGU1120H95) Entry @ $0.94, Exit $0.35 (-62.7%)

07/29 Stopped out on gap open lower @ 87.37
07/21 New stop @ 87.75
07/19 Breakout past $90.00 is a new entry point.
07/19 new stop @ 86.90

chart:

Entry on July 11 at $88.54
Earnings Date 08/03/11 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on July 9, 2011


Open Text Corp. - OTEX - close: 67.56 change: -0.66

Stop Loss: 67.45
Target(s): 74.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
07/30 update: I am dropping OTEX as a bullish candidate tonight. I still think shares may offer some opportunity but not at current levels. Shares closed under the bottom of its recent trading range, which would suggest further downside ahead. We can put OTEX on our watch list and wait for a dip or a bounce in the $66-64 area or wait for a close above resistance at $70.00 as alternative entry points.

Our Trade Never Opened.

07/30 Our trade never opened. OTEX removed from the newsletter.
07/28 We are in a wait and see mode with OTEX
07/27 trade is still not open. We are temporarily removing our entry point for tomorrow. We will re-evaluate this play on Thursday night.

chart:

Entry on July xx at $ xx.xx
Earnings Date 08/10/11 (unconfirmed)
Average Daily Volume = 300 thousand
Listed on July 23, 2011


CLOSED BEARISH PLAYS

Toro Co. - TTC - close: 53.83 change: -0.24

Stop Loss: 58.55
Target(s): --.--, 52.50
Current Option Gain/Loss: +71.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
07/30 update: Target achieved. TTC opened at $53.20 but quickly fell to an intraday low of $51.86. Our final target to exit was hit at $52.05 early Friday morning before the stock rebounded back toward the $54 level.

NOTE: We will not be trading TTC again unless the option volume and spreads improve.

- Suggested Positions -

SEP $55 PUT (TTC1117U55) Entry @ $1.90*, exit $3.25*

07/29 2nd target hit @ 52.50, option @ $3.25 (+71.0%), exit price is an estimate. option did not trade on Friday
07/27 1st Target Hit @ 55.25, Option @ $2.00 (+5%)
07/27 entry price is an estimate. Option did not trade today

chart:

Entry on July 27 at $56.82
Earnings Date 08/18/11 (unconfirmed)
Average Daily Volume = 167 thousand
Listed on July 26, 2011