Editor's Note:

Concerns over Europe continue to plague the markets. Recent U.S. economic data hasn't helped. Now the bounce is failing. Stocks look poised to retest their lows.

Our DIA trade is now open. The MJN trade has been stopped out. We've added some stop losses and pulled the buy-the-dip trigger for adding SPY positions.

-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: -85.1%
Time Frame: 1 to 3 weeks
New Positions: see below

Comments:
08/20 update: DECK has been a HUGE underperformer this past week with a $20 drop. I warned readers about the bearish reversal on Tuesday but was unprepared for the viciousness of the decline. Shares look poised to drop toward the January lows near $71-72. Friday morning saw an oversold bounce from $74 to $80 that faded away to new losses by the closing bell.

The bid on our Sep. $90 calls has vanished and is trading at 70 cents. There is no guarantee that DECK will bounce and volume has been very big on the sell-off. We will probably need to plan on exiting this position on a bounce back toward resistance instead of hoping for a rally to new relative highs. By not exiting now we're taking the risk that DECK does not bounce for the "reward" of recouping some of our capital on another big oversold bounce.

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 aggressive traders might want to consider buying calls but I would use a stop loss just under the $70.00 mark!

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 SEP $90 call (DECK1117I90) Entry $4.70

08/20 Remainder of our August $90 call position expires at $0.00 (-100%), We took profits on these on the 12th at +232%
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%)

chart:

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


Dow Jones Industrial (ETF) - DIA - close: 107.91 change: -2.16

Stop Loss: 105.70
Target(s): 114.50,
Current Option Gain/Loss: - 9.8% & -13.1%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/20 update: Our buy-the-dip trigger was hit at $108.00 late Friday afternoon. I'll repeat my comments from Thursday night. Cautious traders may want to wait for a dip to $107.00 or even towards $106.00 before initiating new bullish positions. Given the market's performance on Friday it certainly seems like we could see the DIA trade closer to $106 soon.

Considering the market's tendency for volatility we will add a stop loss at $105.70 but aggressive traders may want to play without a stop and use a very small position size to limit your risk instead.

Earlier Comments:
We will need to use our position size to limit risk.

- Suggested (small) Positions -

Long SEP $110 call (DIA1117I110) Entry $3.15

- or -

Long SEP $112 call (DIA1117I112) Entry $2.20

08/20 add a stop loss at $105.70

chart:

Entry on August 19 at $108.00
Earnings Date --/--/--
Average Daily Volume = 15 million
Listed on August 18, 2011


Green Mountain Coffee Roasters - GMCR - close: 84.08 change: - 3.61

Stop Loss: n/a
Target(s): 99.50, 107.50
Current Option Gain/Loss: ---.-- & (-64.3%)
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/20 update: It was a brutal week for GMCR. The stock fell 19 points (-18.4%). Thursday's decline actually broke key support at its 50-dma. Friday saw a breakdown under its July lows. Friday also saw an intraday rebound and failed rally at $90.00 followed by a $6 sell-off Friday afternoon. Our September $100 calls currently have a bid of $1.30. Given the failed rally intraday on Friday and the new relative low in GMCR and the fact that the S&P500 and DJIA have yet to test their lows from last week, they are all plenty of reasons to exit early from this trade.

I am also concerned that the up trend in GMCR appears to be broken. Instead of expecting a huge rebound that will see our calls turn profitable we probably need to look at the next big rebound as a chance to exit early and recoup some of our capital instead. On a positive the rebound from Friday morning seems to be at potential support near the late May highs. Although I would expect GMCR to dip to the 100-dma if the S&P500 and DJIA continue to sink on Monday.

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

chart:

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: 61.07 change: -0.29

Stop Loss: 57.80
Target(s): 63.75, 66.00
Current Option Gain/Loss: + 26.3%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/20 update: After a week of showing some decent relative strength it looks like ORLY may have just produced a short-term top. Friday saw a morning rally and a temporary breakout above resistance at $62 and its 50-dma. Yet the rally didn't last and ORLY's gains faded into a decline of -0.4%. Granted that's better than the NASDAQ's -1.6%. The stock should have support in the $60-58 area with technical support at the 200-dma near $59.

I am adjusting our strategy and adding a stop loss at $57.80. More conservative traders may want to use a stop closer to $59 instead. There is the possibility that ORLY is forming a bear-flag pattern (see chart). I'm not suggesting new positions at this time but readers can keep their eyes open for another bounce from the 200-dma as a potential entry point.

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

- Suggested (small) Positions -

Long SEP $60 call (ORLY1117I60) entry $1.90

08/20 new stop loss @ 57.80
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.

chart:

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: 112.64 change: -1.87

Stop Loss: n/a
Target(s): 119.75, 122.50
Current Option Gain/Loss: Sep.$120call (-50.1%)
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/20 update: On Thursday night we were expecting a dip to $112.00 and planned to use it as a new entry point to buy calls (I suggested the Sep. $118 calls). The SPY fell to $112.50 at its low on Friday afternoon after the morning rally attempt failed. Upon further review we do not want to buy the dip on Monday. There is a growing chance that we'll see the SPY retest the $110 (or 1100 on the S&P500 index). Nimble traders may want to consider buying calls again in the $110.50-110.00 zone on the SPY but the newsletter is not adding new positions at this time.

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

- Suggested (SMALL) Positions -

Long SEP $120 call (SPY1117I120) Entry $2.55

08/20 Trigger to add positions at $112.00 was NOT hit. We are removing the entry point. Do not add to positions at this time.
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.

chart:

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: 32.12 change: +0.40

Stop Loss: n/a
Target(s): $37.50, 40.00
Current Option Gain/Loss: - 2.9%
Time Frame: 2 to 3 months
New Positions: see below

Comments:
08/20 update: Crude oil managed a rebound on Friday and the USO added +1.2%. Gains faded late in the day. We will add to our position if we see the USO hit $30.50. The low on August 9th was $30.31. Please see below for further details on this new entry point.

Earlier Comments:
We're not using a stop loss on our original trade (Nov. $34 call entered on Aug. 9th) so keep your position size small!

This is a lottery-ticket style of play.

- Suggested Positions -

Long NOV $34 call (USO1119K34) Entry $2.05

New Entry Point: Buy calls if USO hits $30.50 (again)

Buy the NOV $34 call (USO1119K34)
If triggered, use a stop at $29.00 for this position.

08/20 Adding a new buy-the-dip entry at $30.50, stop @ 29.00

chart:

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: 67.45 change: -0.67

Stop Loss: n/a
Target(s): 76.40, 79.75
Current Option Gain/Loss: (Sep. - 71.5% & Aug. - 100%)
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/20 update: The sell-off has slowed as UTX flirts with support from last week's lows. Our aggressive, higher-risk trade using August options has expired. Further declines from here would look bearish but UTX should have decent support at $65.00. I am suggesting a new entry point to buy calls at the $65.00 level. We still want to keep our position size very small to limit our risk.

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

Buy the dip at $65.00

buy the SEP $67.50 call (UTX1117I67.5)

08/20 New entry point to buy calls on dip at $65.00
08/20 Our aggressive, higher-risk trade with August options has expired. Entry price on Aug. $75 call (UTX1120H75) was $0.29. exit 0.00 (-100%)

chart:

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: 56.83 change: -2.01

Stop Loss: n/a
Target(s): 63.50
Current Option Gain/Loss: - 17.9%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
08/20 update: WFM is down over five points in the last two days. The close under technical support at the 200-dma is worrisome but I have been suggesting readers wait for a dip into the $56-54 zone before initiating new positions. Cautious traders may not want to risk that much so you'll need to consider a stop loss, maybe under $56 or under $54. We are not using a stop at this time. I'd probably wait for a dip into the $55-54 zone before buying calls again.

I will point out that bears could make a case against WFM. You could argue that the peaks in April and July are a bearish double top. Plus the oversold bounce failed near resistance at the 61.8% Fib retracement of the August sell-off. Readers may want to wait for a bounce from the $55-54 zone before initiating bullish positions.

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

chart:

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: 43.05 change: + 0.38

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: -92.5%
Second Position Gain/Loss: - 88.0%
Third Position Gain/Loss: -69.2%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
08/20 update: The VIX spiked toward the 45 level for the second day in a row but closed off its highs. There could be another spike on Monday if the S&P500 dips toward the lows near 1100. The VIX might actually see a new relative high over 48 if the S&P500 trades below the 1100 level. I would be tempted to buy puts again on a spike into the 48-50 area but I would keep positions very small.

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.

chart:

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


CLOSED BULLISH PLAYS

Mead Johnson Nutrition Co. - MJN - close: 66.73 change: -3.23

Stop Loss: 66.99
Target(s): 74.50
Current Option Gain/Loss: -52.4% & -46.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
08/20 update: MJN held up well on Thursday's market decline but then collapsed on Friday. I couldn't find any news behind the relative weakness in MJN on Friday. Shares fell -4.6% and dropped below potential support at $68 and its 50-dma. Our stop loss was hit at $66.99 Friday afternoon.

- Suggested Positions -

SEP $70 call (MJN1117I70) Entry $2.63, exit $1.25 (- 52.4%)

- or -

SEP $75 call (MJN1117I75) Entry $0.75, exit $0.40 (- 46.6%)

08/19 stopped out @ 66.99

chart:

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