Editor's Note:

The U.S. market plunged again, following a very bad day for European stocks. Economic data in the U.S. only added fuel to the fire. There were some HUGE moves in stocks today and the VIX rose +35%.

I'm suggesting an early exit for the TDC trade. Our HPQ trade was aborted due to an early announcement.

-James

Current Portfolio:


CALL Play Updates

Deckers Outdoor - DECK - close: 75.02 change: -8.35

Stop Loss: n/a
Target(s): 93.50, 97.00
Current Option Gain/Loss: -100.0% & -77.6%
Time Frame: 1 to 3 weeks
New Positions: see below

Comments:
08/18 update: DECK has been crushed for a $20 loss in the last three days! Unfortunately there has been zero news to account for this stock's relative weakness. Today's volume was approaching three times the normal volume, which is a very bearish signal on such a down day. DECK has also broken down below last week's lows when the market was plunging. DECK has also broken below what should have been significant support in the $77-78 zone.

Is a minus $20 drop in three days too much? Yes, it is. Does that guarantee an oversold bounce soon? No, it does not. Right now our August call will expire worthless. The September $90 call has a bid near $1.00. If you believe the market will keep falling then I suggest you exit the Sep. call now. I suspect that with four weeks left before September options expire there is a good chance DECK will see another sharp rebound. Now will it hit $95 again? I can't say. DECK could be in a new pattern of lower highs and lower lows but I'd rather exit our Sep. $90 call in the $85-90 zone than at $75.

Nimble traders may want to focus on the January lows near $72-71. If we get a dip near this area, or better yet a bounce, then readers can use it as a new entry point to buy calls on DECK again. (Sept. $80 calls?)

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 not listing a stop loss on this trade.

- Suggested (SMALL) Positions -

Long AUG $90 call (DECK1120H90) Entry $1.52

- or -

Long SEP $90 call (DECK1117I90) Entry $4.70

08/18 DECK is down nearly 20 points in three days
08/12 1st target hit @ 93.50
bid on Aug. $90 call @ $5.05 (+232.2%)
bid on Sep. $90 call @ $8.45 (+79.7%)

Entry on August 11 at $83.53
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on August 9, 2011


Green Mountain Coffee Roasters - GMCR - close: 87.69 change: -11.04

Stop Loss: n/a
Target(s): 99.50, 107.50
Current Option Gain/Loss: ---.-- & - 37.5%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/18 update: GMCR was a HUGE underperformer today with a -11.1% drop. There was no company specific news to account for the relative weakness. Traders were just selling anything they could and GMCR was one of the few stocks that had not yet broken their up trend. That changed today. GMCR has broken below round-number support at $90.00 and technical support at its 50-dma with today's big drop. If you're bullish on the stock you could argue that GMCR has not yet broken below support in the $88.00-87.50 zone where it bounced back in July (twice). There is a chance GMCR could hold this level but I would not bet on it.

If you think the market is going to keep falling and breakdown to new lows then you will want to exit our remaining September call position now while the bid still has any value (currently $2.29). I suspect the market's major indices will test last week's lows and bounce. What concerns me is that GMCR has actually broken below last week's lows.

I am not suggesting new positions at this time.

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.

- Suggested (SMALL) Positions -

Long SEP $100 call (GMCR1117I100) Entry $3.65

08/18 if you're bearish on the market, then exit now! Sep.bid @$2.29
08/15 exit August $95 calls immediately. Bid @ $7.95 (+190.1%)
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


Mead Johnson Nutrition Co. - MJN - close: 69.96 change: -1.07

Stop Loss: 66.99
Target(s): 74.50
Current Option Gain/Loss: - 8.7% & -12.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/18 update: MJN held up pretty well. shares saw a dip back toward its lows from Monday and Tuesday this week and the stock was actually bouncing higher midday. If the S&P500 index opens positive tomorrow I would consider buying calls on MJN. Otherwise, I'd wait for the S&P500 to test its lows from last week and then look to see where MJN is trading and consider new positions then.

- Suggested Positions -

Long SEP $70 call (MJN1117I70) Entry $2.63

- or -

Long SEP $75 call (MJN1117I75) Entry $0.75

Entry on August 17 at $71.11
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on August 16, 2011


O'Reilly Automotive - ORLY - close: 61.36 change: +0.30

Stop Loss: n/a
Target(s): 63.75, 66.00
Current Option Gain/Loss: + 26.3%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/18 update: ORLY was one of the few stocks to actually post a gain today. The stock did see some volatility this morning but traders bought the dip near ORLY's 200-dma. Volume was strong on the bounce today. If the S&P500 index opens positive tomorrow then I would launch new positions in ORLY. Otherwise, wait for the S&P500 to near its lows from last week before considering new positions here.

Earlier Comments:
Use a small position size to limit your risk.

- Suggested (small) Positions -

Long SEP $60 call (ORLY1117I60) entry $1.90

08/15 trade opened
08/13 adjusted entry point. removed Aug. strike
08/10 new trigger at $55.00
08/09 adjusted targets to $63.75 and $66.00.

Entry on August 15 at $60.37
Earnings Date 10/26/11 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on August 6, 2011


SPDR S&P500 ETF - SPY - close: 114.51 change: -5.16

Stop Loss: n/a
Target(s): 119.75, 122.50
Current Option Gain/Loss: Sep.$120call (-26.2%)
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/18 update: We're right back to where we started with the SPY. Well, actually it's a little bit lower with today's close under what should have been support at $115.00 (1150 on the S&P500 index). I suspect that the market will retest its lows from last week. Now whether or not that means the SPY dips to support near $112 or if it actually drops toward the $110 level is up for debate.

We are going to ADD a new bullish position if the SPY hits $112.00 again. I'm listing this as a new play tonight but we'll consolidate both trades here in the play updates section tomorrow. The plan is to buy the September $118 call if the SPY hits $112.00. More conservative traders could wait and see if the SPY dips to $111.00 or $110.50 instead as your entry point. We will not use a stop loss on this trade but you might consider a stop loss under $110.00.

Earlier Comments:
We are not using a stop loss on this trade.

- Suggested (SMALL) Positions -

Long SEP $120 call (SPY1117I120) Entry $2.55

- TRIGGER: buy-the-dip @ $112.00 - Suggested (SMALL) Positions -

Buy SEP $118 call (SPY1117I118)

08/18 adding a new entry point to buy the Sep.$118call at $112.00
08/16 exit Aug. $118 call now. bid $2.26 (+5.1%)
08/15 1st target hit @ 119.75
bid on the Aug. $118 call @ $2.15 (+0.0%)
bid on the Sep. $120 call @ $3.32 (+30.1%)
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: 31.72 change: -2.29

Stop Loss: n/a
Target(s): $37.50, 40.00
Current Option Gain/Loss: -10.2%
Time Frame: 2 to 3 months
New Positions: see below

Comments:
08/18 update: A parade of lackluster or bearish economic data in the U.S. today and worries over the global economy all helped push crude oil lower. The USO fell -6.7%. I have been suggesting readers wait for a dip into the $32-30 zone as our next entry point. Well here it is. Although I suspect the USO will probably dip into the $31-30 zone soon so readers may want to wait and launch positions on a pull back closer to $30. If we're lucky we could see the option drop to $1.50ish on a dip near $30.

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.

- 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


United Technologies Corp. - UTX - close: 68.12 change: -3.93

Stop Loss: n/a
Target(s): 76.40, 79.75
Current Option Gain/Loss: (Sep. - 67.2% & Aug. - 100%)
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/18 update: Ouch! The S&P500 lost -4.4% and the Dow Jones Industrials lost -3.6%. Yet UTX underperformed them both with a -5.4% decline. The stock has fallen toward its lows from last week during the extreme market volatility. The $67.00 level "should" be support. Readers may want to wait for UTX to bounce from $67.00 before initiating new positions. At this point our high-risk, aggressive August call position will expire worthless.

Earlier Comments:
We want to keep our position size small since I'm not listing a stop loss.

- Suggested Positions -

Long SEP $75 call (UTX1117I75) Entry $1.83

- or high-risk trade with August calls -

Long AUG $75 call (UTX1120H75) Entry $0.29

Entry on August 15 at $73.21
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 6.6 million
Listed on August 13, 2011


Whole Foods Market, Inc. - WFM - close: 58.84 change: -3.20

Stop Loss: n/a
Target(s): 63.50
Current Option Gain/Loss: + 9.3%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/18 update: After outperforming most of the week shares of WFM finally caved into profit taking. Today's -5.1% drop erased yesterday's gains and more. WFM seemed to find some support late in the day as it neared the simple 200-dma. Unfortunately the huge volume that was +300% above normal is a bearish signal for today's weakness. I would prefer to wait for another dip near the $56-54 area before considering new bullish positions in WFM.

Earlier Comments:
We want to keep our position size small since we're not listing a stop loss.

- Suggested Positions -

Long SEP $60 call (WFM1117I60) Entry $2.45

Entry on August 15 at $58.68
Earnings Date 11/03/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on August 13, 2011


PUT Play Updates

CBOE Volatility Index - VIX - close: 42.67 change: +11.09

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: -90.0%
Second Position Gain/Loss: - 84.0%
Third Position Gain/Loss: -63.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/18 update: With the market in sell-off mode the VIX naturally spiked higher. Today saw the VIX surged +35%. This index hit the 45 level intraday. Last week's high was 48.00. Nimble traders could try launching new positions on another spike near the 48-50 area but I am not suggesting new positions 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.

- Suggested Positions -

Long SEP $25.00 PUT (VIX1121U25) Entry $4.00

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

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

08/17 August VIX options expire
1st position Aug. $25 put @ $0.00 (-100%)
2nd position Aug. $25 put @ $0.00 (-100%)
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


CLOSED BULLISH PLAYS

Teradata Corp. - TDC - close: 45.42 change: -6.98

Stop Loss: n/a
Target(s): 62.00
Current Option Gain/Loss: - 92.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/18 update: Earnings warnings from the likes of NetApp (NTAP) and JDS-Uniphase (JDSU) sparked new concerns about an IT spending slowdown that crushed the technology sector today. TDC was hammered lower with a -13.3% decline. Shares gapped open lower near support at $50 and its 200-dma and then rushed lower to fall toward the next level of support near $45.00. Volume was massive on the sell-off. The stock is down almost -20% in three days, which was completely unexpected.

We still have four weeks left before September options expire but odds are our call position will not recover. Currently there is a bid of 5 cents and I am suggesting an exit now. You may want to wait and see. There is always the possibility that TDC could rebound back into the $50-55 zone before September expiration and we could recoup a larger chunk of our capital but I do not see this trade ever being profitable, not after today's drop in TDC.

Earlier Comments:
Use your position size to manage risk.

- Suggested Positions -

SEP $60 call (TDC1117I60) Entry $0.65, exit $0.05 (-92.3%)

chart:

Entry on August 17 at $54.76
Earnings Date 11/03/11 (unconfirmed)
Average Daily Volume = 2.8 million
Listed on August 15, 2011


CLOSED Market Neutral Plays

Hewlett-Packard Co - HPQ - close: 29.51 change: -1.88

Stop Loss: n/a
Target(s): TBD
Current Option Gain/Loss: + 0.0%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
08/18 update: Our HPQ trade never had a chance to start!

The plan was to buy options at the close today in preparation for HPQ's earnings, which were due out after the closing bell tonight. Yet HPQ released earnings early around 3:00 p.m.

It proved to be a rocky day for HPQ. The stock was halted twice. There was news the company would spin-off its PC business. Then rumors circling that HPQ would buy the British software firm Autonomy Corp. (AUTNF) for $10 billion. HPQ later confirmed that they were buying Autonomy for a $42.11 a share (a 64% premium).

The earnings release showed a profit of $1.10 a share, which was 1 cent better than expected. Revenues were slightly above expectations at $31.2 billion. Management issued downside guidance for the next quarter with estimates of $1.12-1.16 a share compared to Wall Street's estimates for next quarter at $1.31.

HPQ also dropped the bombshell that they would discontinue the webOS phones and the webOS TouchPad product line. The TouchPad, a tablet PC designed to compete with Apple's iPad, just went on sale a month ago. Sales have been so bad there are rumors that major retailers are asking HPQ to take them back. If HPQ is already killing the product it must have been a pretty dismal launch for the TouchPad.

Our strategy to buy options at the close to open positions prior to earnings was thwarted by the company's early announcement.

Option Straddle (buy a call and put at the same strike)

Play did not open.

- or -

Option Strangle (buy an OTM call and OTM put)

Play did not open.

Annotated Chart:

Entry on August 18 at $ xx.xx
Earnings Date 08/18/11 (confirmed)
Average Daily Volume = 21.4 million
Listed on August 17, 2011