Editor's Note:

The U.S. stock market witnessed another intraday plunge on Friday in spite of the better than expected July jobs number.

The S&P 500 saw a -2.6% drop from its opening print near 1200 down to a new relative low at 1168. The index managed an intraday rebound but failed to close above the 1200 level.

It was not a great day for our new trades since the higher open triggered some trades and the big intraday plunge stopped us out.

-James

Current Portfolio:


CALL Play Updates

Core Labs - CLB - close: 103.25 change: +3.70

Stop Loss: 95.45
Target(s): 104.90, 109.75
Current Option Gain/Loss: +60.0% & +70.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/06 update: Friday proved to be another very volatile day for the stock market. CLB was no exception. Shares opened at $100.23 only to plunged to $96.78 that morning. When stocks did reverse higher CLB outperformed and rallied to a +3.7% gain with a close back above its 100-dma. Volume was very strong on the session. The rebound near its 200-dma is also a bounce near its long-term weekly trendline (see chart below).

The $105.00 level could be short-term resistance, which is why our first target is $104.90. I am not suggesting new bullish positions at this time.

Stop Loss Placement: Readers need to decide what you're going to do about a stop loss on CLB. We are expecting the market to gap open lower on Monday due to the S&P downgrade of U.S. debt. There is no way to know how big this knee-jerk reaction could be but we're expecting traders to buy the sell-off after the initial move lower. That could be near the S&P 500 index at 1150 or at 1100. We just don't know.

Do you raise your stop loss on CLB an effort to reduce risk since you can always jump back later? Or do you remove your stop loss and just give CLB room to maneuver on what will likely be a crazy, crazy Monday and the re-set your stop loss on Monday night? We are moving our stop loss down to $95.45, which keeps it under the simple 200-dma and gives CLB a little room to move. You have to decide what works best for you.

FYI: August options expire in about two weeks.

- Suggested (SMALL) Positions -

Long AUG $105 call (CLB1120H105) Entry $1.25*

- or -

Long SEP $105 call (CLB1117I105) Entry $2.00
08/05 stop loss @ 95.45, under the 200-dma
08/05 play opened.
08/05 *entry price is an estimate. option did not trade today
08/04 Adjusted our strategy for the decline. New stop loss @ 95.80. New targets are $104.90 and $109.75. Buy calls if both CLB and S&P 500 are positive at the open tomorrow.

Annotated Chart:

Weekly Chart:

Entry on August 5 at $100.23
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 526 thousand
Listed on August 2, 2011


PUT Play Updates

CBOE Volatility Index - VIX - close: 32.00 change: +0.34

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: -56.0% & -27.5%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/06 update: Friday's session turned out seriously different than expected. Did we get an unexpected jobs number? Yes. Did the VIX open lower because stocks were bouncing at the open? Yes. Unfortunately after that reality quickly veered from expectations. Stocks accelerated lower again and this time the VIX shot higher and traded above 39.00. Then the ECB news that they might buy Italian and Spanish bonds helped turn the market around. The VIX fell back toward Thursday's close.

New Positions?
Now that S&P has downgraded the U.S. credit rating the market could see a very sharp, knee-jerk reaction lower on Monday. Stocks will most likely gap open lower and the VIX will most likely gap open higher, potentially a lot higher.

The spike higher in the VIX on Monday could be a great new entry point to buy puts. It's up to you if you buy the open or wait and watch to see where the VIX might falter but trying to pick a top intraday is pretty hard. Alternatively you could look for a spike into the 45-50 zone as an entry point to buy puts again.

The newsletter will open a second position at the open, but these should be very small, speculative trades.

Earlier Comments:
I am not listing a stop loss on this trade. We should consider this a higher-risk, speculative trade. I'm setting our targets at 26.00 and 22.50. NOTE: August VIX options expire after the 17th of the month. You may want to buy Septembers instead.

- Suggested Positions -

Long AUG $25.00 PUT (VIX1117T25) Entry $2.50

- or -

Long SEP $25.00 PUT (VIX1121U25) Entry $4.00

chart:

Entry on August 5 at $28.48
Earnings Date --/--/--
Average Daily Volume = xxx
Listed on August 4, 2011


CLOSED BULLISH PLAYS

Dow Jones Industrial Avg. (ETF) - DIA - close: 114.25 change: +0.54

Stop Loss: 112.40
Target(s): 117.75, 119.75
Current Option Gain/Loss: -44.2% & -30.5%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
08/06 update: Wow! Friday was another volatile session. After Thursday's -5% plunge the DIA opened at $115.13 on Friday morning thanks to a better than expected jobs report. Then suddenly the market collapsed again and The DIA fell -3.3% from is opening print on Friday. The DIA hit new 8-month lows at $111.26 before bouncing back into positive territory. Volume on Friday was 30.5 million shares compared to the average of 8 million.

Our trade was opened on Friday morning but we were stopped out at $112.40.

- Suggested Positions -

AUG $115 call (DIA1120H115) Entry $2.60, exit $1.45 (-44.2%)

- or -

SEP $115 call (DIA1117I115) Entry $3.60 exit $2.50 (-30.5%)
08/05 opened at $115.12. stopped at $112.40.

Chart:

Entry on August 5 at $115.13
Earnings Date --/--/--
Average Daily Volume = 8.0 million
Listed on August 4, 2011


ProShares Ultra QQQ - QLD - close: 78.23 change: -1.07

Stop Loss: 77.75
Target(s): 84.75, 89.00
Current Option Gain/Loss: -49.6% & -20.8%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
08/06 update: The story is virtually the same with the QLD. Stocks opened higher on the jobs report. The QLD opened at $81.06. Then the market reversed sharply lower on EU debt issues and economic concerns. We were stopped out at $77.75. The QLD hit $73.85 before bouncing back and actually trade above $80 again before settling in the red. Volume today was massive at 15.8 million shares versus the normal 4.0 million.

- Suggested Positions -

AUG $85 call (QLD1120H85) Entry $1.55, exit $0.78 (-49.6%)

- or -

SEP $85 call (QLD1117I85) Entry $3.60, exit $2.85 (-20.8%)

08/05 traded opened at $81.06, stopped at $77.75.

Chart:

Entry on August 5 at $81.06
Earnings Date --/--/--
Average Daily Volume = 4.0 million
Listed on August 4, 2011


Range Resources Corp. - RRC - close: 57.13 change: -2.35

Stop Loss: 56.40
Target(s): 68.00, 69.75
Current Option Gain/Loss: -63.4% & -61.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/06 update: The market's open higher on Friday morning and RRC's gap open at $60.75 triggered our play. Unfortunately the gains immediately faded. RRC was an underperformer and hit our stop loss at $56.40 before noon on Friday. This was a breakdown below what should have been support near $58.00 and its 50-dma. RRC actually hit $54.84 at its worst levels.

- Suggested Positions -

AUG $60 call (RRC1120H60) entry $2.60, exit $0.95 (-63.4%)

- or -

SEP $62.50 call (RRC1117I62.5) entry $3.90*, 1.50 (-61.5%)
08/05 opened at $60.75, stopped at $56.40
08/05 *entry & exit price is an estimate. option did not trade today

chart:

Entry on August 5 at $60.75
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 3.1 million
Listed on August 3, 2011


SPDRs S&P 500 ETF - SPY - close: 120.08 change: -0.18

Stop Loss: 117.90
Target(s): 124.50, 126.25
Current Option Gain/Loss: -47.4% & -35.4%
Time Frame: 1 to 2 weeks
New Positions: Yes, see below

Comments:
08/06 update: Our bet on a bounce and the conditional entry point to only buy calls if the market opened higher did not work on Friday. The trade was opened because the July jobs report was better than expected and stocks opened higher. The SPY gapped open at $121.76. Unfortunately the market immediately sank and the selling was vicious once again. The drop from the open to our stop was -3.1%. The plunge from the open to the low of the day was -4.0%. Stocks managed to rebound intraday on news the EU might buy Italian and Spanish bonds. Even then the SPY still closed negative for the day.

- Suggested Positions -

AUG $122 call (SPY1120H122) Entry $2.72, exit $1.43 (-47.4%)

- or -

SEP $124 call (SPY1117I124) Entry $2.79, exit $1.80 (-35.4%)

08/05 opened at $121.76. stopped @ 117.90
490

chart:

Entry on August 5 at $121.76
Earnings Date --/--/--
Average Daily Volume = 218 million
Listed on August 4, 2011