Editor's Note:

The stock market's lack of follow through higher is a very ugly development. The S&P 500 index has reversed yesterday's end of day gains. Now we're faced with the prospect of retesting and possibly breaking yesterday's lows.

I heard several traders and analysts suggesting that investors should exit this market immediately. There is no strength and no one knows where the bottom is. They were hoping that Monday's session and the Tuesday morning drop was the capitulation bottom but evidently that's not the case yet. Meanwhile investor sentiment numbers are still too bullish to indicate a bottom.

Yet after hours we are not seeing a lot of action in the S&P 500. Cautious traders will want to sit out tomorrow!

-James

Current Portfolio:


CALL Play Updates

Abercrombie & Fitch Co - ANF - close: 65.64 change: -0.30

Stop Loss: n/a
Target(s): 69.75, 73.50
Current Option Gain/Loss: Unopened
Time Frame: 1 to 3 weeks
New Positions: see below

Comments:
08/10 update: Wednesday was another rough day for the markets. Stocks opened lower, including ANF, so our condition to buy calls was not met. Shares did trade up off its lows and hit $67.50 intraday. ANF eventually settled with a 30-cent (-0.4%) loss, which is a show of relative strength compared to the -4.4% plunge in the S&P500.

I suspect there is a growing possibility ANF might retest support near $60.00 and its 200-dma. However, there is no telling what the market is going to do tomorrow morning. Cautious traders will want to sit out on the sidelines.

I am listing two different entry points. If ANF and the S&P500 open positive tomorrow then we will buy the Aug. $70 or Sept.$70 calls. If not, then look for a dip. Yesterday's low was $60.77. I am suggesting an alternative buy-the-dip entry point at $61.00, which in this case we'll buy the $65.00 calls for August and September.

Earlier Comments:
This is an aggressive, higher-risk trade. ANF is due to report earnings on August 17th. We do not want to hold over the report. I am listing both Aug. and Sept. calls. Keep in mind August calls expire in less than two weeks. We are not listing a stop loss on this trade but if you buy September calls you may want to reconsider and add a stop loss.

buy the Aug. $70 and Sep. $70 calls if ANF and S&P500 open positive tomorrow.

- Suggested (SMALL) Positions -

buy the AUG $70 call (ANF1120H70)

- or -

buy the SEP $70 call (ANF1117I70)

- or -

As an alternative, buy the dip at $61.00

- Suggested (SMALL) Positions -

buy the AUG $65 call (ANF1120H65)

- or -

buy the SEP $65 call (ANF1117I65)

Entry on August xx at $ xx.xx
Earnings Date 08/17/11 (confirmed)
Average Daily Volume = 2.8 million
Listed on August 9, 2011


Core Labs - CLB - close: 100.64 change: +0.83

Stop Loss: n/a
Target(s): 104.90, 109.75
Current Option Gain/Loss: -20.0% & +50.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/10 update: CLB displayed some relative strength today. The stock almost hit our first target but the rally stalled at $104.52 this afternoon. CLB ended the day up +0.8%. The strength is encouraging but I would not buy calls here. The market weakness is worrisome. There is a chance CLB will retest support near the $97-95 zone. Aggressive traders could use to buy calls on a dip in that area. I am suggesting readers wait. We will wait and watch to see how the market performs tomorrow and then reconsider new positions.

NOTE: The bid has returned to the Aug. $105 calls.

Earlier Comments:
It's an aggressive trade so keep your position size small. FYI: August options expire in less than two weeks.

- Suggested (SMALL) Positions -

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

- or -

Long SEP $105 call (CLB1117I105) Entry $2.00
08/10 no new positions at this time.
08/08 we are REMOVING the stop loss for this trade
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.

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


Cabot Oil & Gas - COG - close: 66.70 change: +1.09

Stop Loss: n/a
Target(s): 69.75, 72.00
Current Option Gain/Loss: +146.1% & +68.8%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/10 update: Target achieved. COG saw a strong rally this afternoon. Shares hit $69.98. Our first target to take profits was hit at $69.75. The Aug. $70 call was trading with a bid at $2.75 (+323%) and the Sep. $70 call was trading with a bid at $3.90 (+73.3%). Unfortunately when the market began to accelerate lower COG's rally failed at resistance near $70.00. I'm concerned there is a good chance COG will retest the $60 area. Conservative traders may want to take profits now and exit early.

I am not suggesting new positions at this time but aggressive traders might want to buy calls on a dip or a bounce near $60.

Earlier comments:
This is an aggressive trade. The plan was to keep our position size small to limit our risk. FYI: August options expire in less than two weeks.

- Suggested (SMALL) Positions -

Long AUG $70 call (COG1120H70) Entry @ $0.65

- or -

Long SEP $70 call (COG1117I70) Entry $ $2.25*

08/10 1st target hit @ 69.75.
Aug. $70 call bid @ $2.75 (+323%), Sep. $70 call bid @ $3.90 (+73.3%)
08/08 * entry price on the Sept. $70 call is an estimate since the option did not trade on Monday.
08/08 COG gapped open lower at $64.23. No Stop Loss.

chart:

Entry on August 8 at $64.23
Earnings Date 10/25/11 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on August 6, 2011


Deckers Outdoor - DECK - close: 82.72 change: -2.80

Stop Loss: n/a
Target(s): 93.50, 97.00
Current Option Gain/Loss: Unopened
Time Frame: 1 to 3 weeks
New Positions: see below

Comments:
08/10 update: Our new play in DECK is not opened. Shares gapped open lower this morning so our condition to buy calls was not met. DECK eventually saw a rally toward $86.75 this afternoon but reversed lower as the market plunged again. There is a good chance DECK will retest support in the $78-77 zone again. However, there is no telling what the market is going to do tomorrow morning. Cautious traders will want to sit out on the sidelines.

I am listing two different entry points. If DECK and the S&P500 open positive tomorrow then we will buy the Aug. $90 or Sept.$90 calls. If not, then look for a dip. Yesterday's low was $77.57. I am suggesting an alternative buy-the-dip entry point at $78.00, which in this case we'll buy the $85.00 calls for August and September.

Earlier Comments:
I do consider this an aggressive trade. DECK can be a volatile normally and in this market the moves get a little crazy. We definitely want to keep our position size small. I am listing August and September calls but keep in mind that August options expire in less than two weeks. I am not listing a stop loss on this trade.

Buy the $90 calls if DECK and the S&P500 open positive

- Suggested (SMALL) Positions -

buy the AUG $90 call (DECK1120H90)

- or -

buy the SEP $90 call (DECK1117I90)

- or -

As an alternative... buy the dip at $78.00

- Suggested (SMALL) Positions -

buy the AUG $85 call (DECK1120H85)

- or -

buy the SEP $85 call (DECK1117I85)

Entry on August xx at $ xx.xx
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on August 9, 2011


Green Mountain Coffee Roasters - GMCR - close: 98.05 change: - 1.44

Stop Loss: n/a
Target(s): 99.50, 107.50
Current Option Gain/Loss: +117.1% & + 98.6%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/10 update: GMCR held up pretty well considering the size of the drop in the market's major indices. Shares hit $101.39 intraday but settled with a -1.4% decline compared with a -4% drop in the NASDAQ. I am not suggesting new positions at this time. If the market continues to fall GMCR could easily its lows near $90.00. Traders will want to seriously consider exiting any August calls now. We only have seven trading days left before August expiration.

Earlier Comments:
As a high-risk, speculative play we wanted to keep our position size very small. We are not using a stop loss on this play. FYI: August options expire in less than two weeks. We're expecting the bounce to be fast and sharp but you may want to trade September calls for the extra time.

- Suggested (SMALL) Positions -

Long AUG $95 call (GMCR1120H95) Entry @ $2.74

- or -

Long SEP $100 call (GMCR1117I100) Entry $3.65
08/10 Consider exiting all August options now
08/09 adjusting 2nd target to $107.50
08/09 1st target hit at $99.50.
Aug. $95 call bid $6.30 (+129.9%), Sep. $100 call bid $6.95 (+90.4%)
08/08 we are not using a stop loss on this trade

Entry on August 8 at $91.26
Earnings Date 12/08/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on August 6, 2011


O'Reilly Automotive - ORLY - close: 57.53 change: -2.46

Stop Loss: n/a
Target(s): 63.75, 66.00
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/10 update: We changed our entry point strategy on ORLY last night but the conditions to buy calls were not met this morning. Shares gapped open lower so we're still on the sidelines. Today's -4.1% drop essentially erased yesterday's gains. Now there is a chance ORLY will actually retest last week's lows.

We are altering our entry point strategy. We'll put a buy-the-dip entry point at $55.00 since the $55-54 zone should be the next level of support. If triggered we'll readjust our targets.

Earlier Comments:
Use a small position size to limit your risk. FYI: August options expire in less than two weeks. We're expecting the bounce to be fast and sharp but you may want to trade September calls for the extra time.

buy the dip at $55.00

- Suggested Positions -

buy the AUG $55 call (ORLY1120H55)

- or -

buy the SEP $60 call (ORLY1117I60)
08/10 new trigger at $55.00
08/09 adjusted targets to $63.75 and $66.00.

Entry on August xx at $ xx.xx
Earnings Date 10/26/11 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on August 6, 2011


SPDR S&P500 ETF - SPY - close: 112.29 change: -5.19

Stop Loss: n/a
Target(s): 119.75, 122.50
Current Option Gain/Loss: -46.5% & -30.5%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/10 update: Ouch! The volatility in this market is ridiculous. I heard a chorus of traders and analysts telling everyone to get out of this market because you can't trade it. Today's drop in the SPY essentially erased yesterday's end of day gains. It looks like the SPY will retest its lows near $110 soon. This time I would not be so eager to buy the dip. Instead you may want to wait and buy a bounce instead. The newsletter is not suggesting new positions at this time.

Earlier Comments:
We are not using a stop loss on this trade. FYI: August options expire in two weeks. We're expecting the bounce to be fast and sharp but you may want to trade September calls for the extra time.

- Suggested (SMALL) Positions -

Long AUG $118 call (SPY1120H118) Entry $2.15

- or -

Long SEP $120 call (SPY1117I120) Entry $2.55

08/08 trade opened at $115.00. We are not using a stop loss.

Entry on August 8 at $115.00
Earnings Date --/--/--
Average Daily Volume = 235 million
Listed on August 6, 2011


U.S. Oil Fund - USO - close: 31.78 change: +0.16

Stop Loss: n/a
Target(s): $37.50, 40.00
Current Option Gain/Loss: + 3.4%
Time Frame: 2 to 3 months
New Positions: see below

Comments:
08/10 update: Oil and the USO was not quite as volatile as the equity markets. The USO actually managed to close up in positive territory. Unfortunately, if we see another widespread sell-off tomorrow it could drag the USO down with it. Nimble traders could try and buy a dip near $30.00 again. Just remember that we're not using a stop loss on this trade so keep your position size small!

Earlier Comments:
This is another lottery-ticket style of play. We are not listing a stop loss. We plan on holding this trade for several weeks.

- Suggested Positions -

Long NOV $34 call (USO1119K34) Entry $2.05

Entry on August 9 at $31.97
Earnings Date --/--/--
Average Daily Volume = 10.7 million
Listed on August 8, 2011


PUT Play Updates

CBOE Volatility Index - VIX - close: 42.99 change: + 7.93

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: -96.0% & -46.2%
Second Position Gain/Loss: -88.8% & - 14.0%
Third Position Gain/Loss: - 8.7%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/09 update: The volatility in this market has been pretty incredible. After yesterday's -13 point drop the VIX surged another +22.6% to close up almost 8 points. It looks like it could go a lot higher if the S&P 500 index breaks down under support near the 1100 level. Of course I use the term "support" very loosely. Support levels haven't lasted very long in this market.

We are not suggesting new positions in the VIX at this time.

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

- Second Position, entered at the open on Monday, Aug. 8th -
(very small positions)

Long AUG $25.00 PUT (VIX1117T25) Entry $0.90

- or -

Long SEP $25.00 PUT (VIX1121U25) Entry $2.50

- 3rd Position, listed Aug. 8th, Open Aug. 9th @ open. -

Long SEP $30.00 PUT (VXI1121U30) Entry $5.70

08/08 3rd position listed to buy at the open on Aug. 9th
08/08 2nd position was filled the open.

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


Market Neutral Play Updates

Cisco Systems - CSCO - close: 13.73 change: -0.33

Stop Loss: n/a
Target(s): ----
Current Straddle Gain/Loss: + 5.4%
Current Strangle Gain/Loss: - 35.7%
Time Frame: less than two weeks
New Positions: no, no new positions at this time

Comments:
08/10 update: CSCO opened at $13.93, danced around the $14.00 level and then closed down -2.3% ahead of its earnings report. The company reported earnings of 40 cents a share, which was two cents better than expected. Revenues surged +3.7% to $11.2 billion, which was also better than expected. The stock spiked higher in after hours market and briefly saw a +10% gain but the after hours rally was fading into the night. We will have to see how the stock performs tomorrow.

I am not suggesting new positions at this time.

NOTE: The strangle is pretty aggressive. CSCO may not move that much.

Option Straddle (cost: $1.43, current: $1.51)

Long AUG $14 call (CSCO1120H14) Entry $0.65, current bid $0.64
- and -
Long AUG $14 put (CSCO1120T14) Entry $0.78, current bid $0.87

- or -

Option Strangle (cost: $0.28, current: $0.18)

Long AUG $16 call (CSCO1120H16) Entry $0.14, current bid $0.10
- and -
Long AUG $12 put (CSCO1120T12) Entry $0.14, current bid $0.08

Entry on August 10 at $13.93
Earnings Date 08/10/11 (confirmed)
Average Daily Volume = 68.7 million
Listed on August 9, 2011