Editor's Note:

The U.S. stock market has broken down to new relative lows as investors worry over deteriorating economics. The major indices have also broken through multiple layers of support. The up trend that started off the 2009 lows is now broken for these indices: S&P 500, DJIA, SOX, and the Dow Transports. The NASDAQ and Russell 2000 have not yet broken this trendline but they're getting closer.

We had a couple of call plays get stopped out. I'm also suggesting a couple of early exits. Our put play hit our first profit target today. Meanwhile all of our market neutral plays have turned profitable.

-James

Current Portfolio:


CALL Play Updates

Energizer Holdings Inc. - ENR - close: 79.94 change: -1.56

Stop Loss: 79.25
Target(s): 84.85, 88.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
08/02 update: Our new ENR trade is not open yet. The plan was to buy calls if ENR and the S&P 500 opened positive today. Neither opened positive this morning. I am temporarily removing our entry point to open positions in ENR. We'll wait and see what happens tomorrow. The stock should find some support in the $78-77 zone. We might consider buying a bounce in this area around $77.50ish but for tomorrow there is no entry point. We'll just wait and watch.

No Entry Tomorrow - Wait & Watch.

Entry on August xx at $ xx.xx
Earnings Date 11/02/11 (unconfirmed)
Average Daily Volume = 717 thousand
Listed on August 1, 2011


Noble Energy, Inc. - NBL - close: 96.23 change: -3.39

Stop Loss: 94.25
Target(s): 104.50, 109.00
Current Option Gain/Loss: -71.0% & -54.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/02 update: Concerns over an economic slow down is pushing oil prices lower and that's having a negative impact on the energy stocks. Tuesday was an ugly day for NBL. Shares underperformed with a -3.4% decline after failing at the $100 mark this morning. It's only Tuesday but the weekly chart's newest candlestick is forming a bearish engulfing pattern. NBL looks like it's headed for the next level of support near $95.00. Of course there is no guarantee that NBL will bounce there. More conservative traders will want to consider abandoning ship and exiting early right now. I am not suggesting new bullish positions at this time.

Earlier Comments:
FYI: The Point & Figure chart for NBL is bullish with a $111 target. NOTE: August options expire in three weeks.

- Suggested Positions -

Long AUG $105 call (NBL1120H105) Entry $0.69

- or -

Long SEP $105 call (NBL1117I105) Entry $2.50*
08/02 cautious traders may want to exit immediately
08/01 *entry price is an estimate. option did not trade today

Entry on August 1 at $101.04
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on July 30, 2011


Market Neutral Play Updates

SPDR Dow Jones Industrial Average (ETF) - DIA - cls: 118.46 chg: -2.65

Stop Loss: n/a
Target(s): -----
Option Straddle Gain/Loss: + 7.5%
Option Strangle Gain/Loss: +16.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/02 update: The DIA has plunged through technical support at its simple and exponential 200-dma. Shares have also closed under their June lows. I am not suggesting new positions at this time.

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: $4.83)

Long AUG $123 call (DIA1120H123) Entry @ $2.33, current bid $0.38
- and also buy -
Long AUG $122 put (DIA1120T122) Entry @ $2.16, current bid $4.45

- or -

Trade #2. Option Strangle (cost: $1.64, current: $1.91)

Long AUG $127 call (DIA1120H127) Entry @ $0.64, current bid $0.01
- and also buy -
Long AUG $117 PUT (DIA1120T117) Entry @ $1.00*, current bid $1.90

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.

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: 76.75 change: -2.47

Stop Loss: n/a
Target(s): --
Option Straddle Gain/Loss: + 1.1%
Option Strangle Gain/Loss: +14.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/02 update: The small cap indices were crushed today. The IWM fell -3.1% and closed under its March and June lows. The next stop looks like it could be the $74 area. I am not suggesting new positions at this time.

Trade #1. Option Straddle (cost: $4.43, current: $4.48)

Long AUG $80 call (IWM1120H80) Entry @ $2.17, current bid $0.49
- and also buy -
Long AUG $80 put (IWM1120T80) Entry @ $2.26, current bid $3.99

- or -

Trade #2. Option Strangle (cost: $1.50, current: $1.72)

Long AUG $84 call (IWM1120H84) Entry @ $0.52, current bid $0.02
- and also buy -
Long AUG $76 PUT (IWM1120T76) Entry @ $0.98, current bid $1.70

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.

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: 125.49 change: -3.29

Stop Loss: n/a
Target(s): --
Option Straddle Gain/Loss: + 6.0%
Option Strangle Gain/Loss: +30.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/02 update: The sell-off in the S&P 500 and the SPY is accelerating. Shares have closed under their June lows. The SPY is about to hit its march low. A close under the March low would be a breakdown of the neckline to a bearish head-and-shoulders pattern. I am not suggesting new positions at this time.

Trade #1. Option Straddle (cost: $5.61, current: $5.95)

Long AUG $130 call (SPY1120H130) Entry @ $3.10 current bid $0.66
- and also buy -
Long AUG $130 put (SPY1120T130) Entry @ $2.51, current bid $5.29

- or -

Trade #2. Option Strangle (cost: $2.69, current: $3.52)

Long AUG $134 call (SPY1120H134) Entry @ $1.14, current bid $0.09
- and also buy -
Long AUG $127 PUT (SPY1120T127) Entry @ $1.55, current bid $3.43

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.

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: 89.06 change: -2.37

Stop Loss: 94.25
Target(s): 90.50, 86.00
Current Option Gain/Loss: +48.5% & +50.0%
2nd Position Gain/Loss: +79.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
08/02 update: The early morning bounce attempt failed near $92.40 and FDS reversed lower. Shares have now broken below round-number support at $90.00. Our first target to take profits was hit at $90.50. I am lowering our stop loss down to $94.25.

I am not suggesting new positions at this time. We'll wait and watch for another failed rally at prior support (if the spreads aren't too wide).

FYI: Aug. $95 put current bid is $5.20. Sept. $90 put bid is $3.60.

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*

08/02 new stop loss @ 94.25
08/02 1st target hit @ 90.50. Aug. $95 @ $3.95 (+12.8% & 2nd position +36.2%), Sept. $90 @ $2.85 (+18.7%). These prices are estimates. Neither option traded today.
08/01 new stop loss @ 96.05
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

Alliance Data Systems - ADS - close: 95.41 change: -2.33

Stop Loss: 95.75
Target(s): 104.50. 107.00
Current Option Gain/Loss: -71.4% & -53.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/02 update: It has been a rough couple of days for the stock market. After our less than attractive entry point yesterday in ADS the stock continued to sell-off, following the market lower. ADS broke down under short-term support at $96.00 this afternoon and hit our stop loss at $95.75.

- Suggested Positions -

AUG $105 call (ADS1120H105) Entry $0.35, exit $0.10 (-71.4%)

- or -

SEP $105 call (ADS1117I105) Entry $1.50*, exit 0.70* (-53.3%)

08/02 stopped out. *option did not trade, exit is an estimate
08/01 Our trade is opened. ADS opened higher at $99.56
08/01 *entry price is an estimate. option did not trade today.
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 August 01 at $99.56
Earnings Date 07/21/11
Average Daily Volume = 825 thousand
Listed on July 26, 2011


Caterpillar Inc. - CAT - close: 97.18 change: -3.54

Stop Loss: 96.45
Target(s): 104.00, 109.00
Current Option Gain/Loss: -35.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/02 update: I'm throwing in the towel early with our aggressive CAT trade. Economically sensitive stocks like CAT are getting hammered. Shares plunged -3.5% and closed under technical support at its 200-dma. I am suggesting an early exit now before CAT hits our stop loss.

- Suggested (SMALL) Positions -

AUG $100 call (CAT1120H100) entry @ $2.90, exit $1.88 (-35.1%)

08/02 exit early.

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: 56.27 change: -1.46

Stop Loss: 56.75
Target(s): 62.50, 64.75
Current Option Gain/Loss: -71.1% & -92.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
08/02 update: The NASDAQ indices were hammered lower on Tuesday. The talking heads on TV were suggesting that investors were selling everything in an effort to raise cash. The NASDAQ-100 index fell -2.49% and the NASDAQ Composite plunged -2.74%. The QQQ broke down under support near $57.00 and quickly hit our stop loss at $56.75.

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

- Suggested Positions - (SMALL POSITIONS)

AUG $60 call (QQQ1120H60) entry @ $0.52, exit $0.15 (-71.1%)

- or -

AUG $62 call (QQQ1120H62) entry @ $0.13, exit $0.01 (-92.3%)

08/02 stopped out @ 56.75
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


Quality Systems, Inc. - QSII - close: 88.50 change: -2.21

Stop Loss: 87.40
Target(s): 99.50
Current Option Gain/Loss: -73.3% & -55.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/02 update: I am giving up on QSII. This morning saw a rally from about $90 to $92.30 that quickly reversed and shares fell to a -2.4% decline. There is a still a chance that QSII bounces near $88 but I suspect the stock is headed for $86.00 or lower. The action yesterday and today looks like a bearish reversal and bull trap pattern. I'd rather exit early and look for new entry points later.

- Suggested Positions -

AUG $95 call (QSII1120H95) Entry $1.50*, exit $0.40 (-73.3%)

- or -

SEP $95 call (QSII1117I95) Entry $2.70, exit $1.20 (-55.5%)
08/02 exit early.
08/01 *entry price is an estimate. option did not trade today

chart:

Entry on August 1 at $92.25
Earnings Date 10/31/11 (unconfirmed)
Average Daily Volume = 235 thousand
Listed on July 30, 2011