Editor's Note:

One of our bullish candidates surged to new highs on takeover rumors. That stock is MJN, which hit our trigger to open positions this morning.

The market's widespread gains fueled a breakout in MCO and our put play has been stopped out.

-James

Current Portfolio:


CALL Play Updates

Dollar Tree, Inc. - DLTR - close: 74.76 change: +2.76

Stop Loss: 68.95
Target(s): 76.00, 79.00
Current Option Gain/Loss: Sep$75: +10.0% & Oct$75: +21.2%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/14 update: It was a big day for DLTR. Shares outperformed the major indices with a +3.8% gain. The stock tagged a new all-time high at $75.52 this afternoon. I am suggesting we exit our September $75 calls immediately. The bid has risen to 55 cents, which means this position has gone from -90% to +10%. The newsletter will exit these Sep. $75 calls at the open tomorrow.

Our first exit target for the October calls is at $76.00. More conservative traders may want to consider raising their stop loss. No new positions today.

- Suggested Positions -

Long SEP $75 call (DLTR1117I75) Entry $0.50

- or -

Long OCT $75 call (DLTR1122J75) Entry $2.35

09/14 exit the September $75 calls ASAP (tomorrow morning)
09/07 trade is open. DLTR gapped open at $72.97
09/06 trade not open. Adjusted entry point strategy, stop loss, and targets.

Entry on September 7 at $72.97
Earnings Date 11/17/11 (unconfirmed)
Average Daily Volume = 2.2 million
Listed on September 3, 2011


Ingersoll-Rand Plc. - IR - close: 33.65 change: +0.43

Stop Loss: 31.25
Target(s): 34.75, 36.75
Current Option Gain/Loss: Sep$33: -29.6% & Oct$35: -21.6%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/14 update: Trading in IR was not terribly exciting. Shares mirrored the action in the S&P 500 index although this does look like a breakout over the 40-dma.

I am suggesting we exit our September $33 calls immediately at the opening bid tomorrow.

I am not suggesting new positions tonight.

- Suggested Positions -

Long SEP $33 call (IR1117I33) Entry $1.35*

- or -

Long OCT $35 call (IR1122J35) Entry $1.85

09/14 exit Sep. $33 calls tomorrow morning at the open
09/07 trade opened. IR gapped higher at $33.39
*price is an estimate. option did not trade today
09/06 play not open. try again. new stop loss $31.25

Entry on September 7 at $33.39
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 8.0 million
Listed on September 3, 2011


Mead Johnson Nutrition - MJN - close: 75.25 change: +2.73

Stop Loss: 69.90
Target(s): 77.00, 79.50
Current Option Gain/Loss: Oct$70: +29.8% & Oct$75: +11.1% Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/14 update: Our new trade on MJN was triggered at the open. Our plan was to buy calls at $73.00. The stock gapped open higher at $73.22 and rallied to $76.31 intraday. The stock closed with a +3.7% gain thanks to rumors that MJN might be a takeover target. Broken resistance in the $72-73 area should be new support. I am raising our stop loss to $69.90. More conservative traders may want to raise their stop even higher but keep in mind that MJN can be a volatile stock.

I would not open positions at current levels. Look for another bounce from the $73-72 area.

Earlier Comments:
NOTE: The spreads on the Oct. $75 calls are a lot wider than the spreads on the $70s. Buying the $75s would be a riskier bet.

- Suggested Positions -

Long OCT $70 call (MJN1122J70) Entry $5.20*

- or -

Long OCT $75 call (MJN1122J75) Entry $3.15

09/14 new stop loss @ 69.90
*09/14 entry price is an estimate

Entry on September 14 at $73.22
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on September 13, 2011


PriceSmart Inc. - PSMT - close: 72.64 change: +2.90

Stop Loss: 66.60
Target(s): 74.00
Current Option Gain/Loss: +58.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/14 update: It was another bullish day for PSMT. The stock garnered bullish analyst comments this morning and an $87 price target. Shares gapped open above the $70.00 level and rallied to $73.19 intraday. Our exit target is at $74.00, which could be hit tomorrow. More aggressive traders could aim higher. Please note that I am adjusting our stop loss to $66.60, which is just under the simple 10-dma.

NOTE: Cautious trades will want to consider exiting tomorrow even if PSMT does not hit our target at $74.00 since the stock market might see another Friday sell-off.

Earlier Comments:
It's possible the $70.00 level could be resistance but I'm setting our target at $74.00. The Point & Figure chart for PSMT is bullish with a $77 target.

- Suggested Positions -

Long OCT $70 call (PSMT1122J70) Entry $3.40

09/14 new stop loss @ 66.60

Entry on September 13 at $68.25
Earnings Date 11/10/11 (unconfirmed)
Average Daily Volume = 307 thousand
Listed on September 12, 2011


Range Resources Corp. - RRC - close: 62.25 change: -1.12

Stop Loss: 59.90
Target(s): 69.75, 72.50
Current Option Gain/Loss: Oct$65: -24.2% & Oct$70: -17.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
09/14 update: Uh-oh! RRC is suddenly showing relative weakness on no news. The stock retreated back toward the rising 50-dma. I'd want to see another bounce or maybe a close over $64.00 before considering new positions.

The next obstacle for bulls is resistance in the $66.50-67.00 zone. Conservative traders may want to take profits near $66.50 instead.

- Suggested Positions -

Long OCT $65 call (RRC1122J65) Entry $3.50

- or -

Long OCT $70 call (RRC1122J70) Entry $1.45

09/13 trade opened. RRC @ 63.12

Entry on September 13 at $63.12
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 2.3 million
Listed on September 8, 2011


Sina Corp. - SINA - close: 112.41 change: -1.57

Target(s): 124.00
Entry #1) Current Option Gain/Loss: - 6.7%
Stop Loss: 104.75
Entry #2) Current Option Gain/Loss: +10.0%
Stop Loss: 101.70
Time Frame: 4 to 6 weeks
New Positions: see trigger

Comments:
09/14 update: After yesterday's $7 gain it's not surprising to see a little profit taking today. Readers might want to look for another bounce from the $110 level before considering new bullish positions.

Earlier Comments:
We do want to keep our position size small because SINA can be a volatile stock and we have a wide stop loss. I am setting our target at $124.00. More aggressive traders could aim higher. The inverse H&S pattern would suggest a target in the $150 area.

FYI: The Point & Figure chart for SINA has recently broken through resistance and is bullish with a $146 target.

Entry #1) Triggered @ 112.55, stop: 104.75 (SMALL positions!)

Long OCT $125 call (SINA1122J125) Entry $ 5.15

Entry #2) Entry @ 107.29, stop: 101.70 (SMALL positions!)

Long OCT $120 call (SINA1122J120) Entry $ 6.00

09/13 trade opened. both entry points hit.

Entry #1) Entry on September 13 at $112.55
Entry #2) Entry on September 13 at $107.29
Earnings Date 11/15/11 (unconfirmed)
Average Daily Volume = 6.0 million
Listed on September 8, 2011


SPDR S&P500 ETF - SPY - close: 119.37 change: +1.63

Stop Loss: 109.90
Target(s): 119.00, 122.00
Current Option Gain/Loss: Unopened
Time Frame: 4 weeks
New Positions: see below

Comments:
09/14 update: It was another strong day for stocks. The market is up three days in a row. Yet the S&P 500 failed near its highs from last week. Nimble traders may want to consider some short-term puts with a stop just over $121.00 and scalp a few points toward $116-115.

If we see the SPY close over $121.00 we will remove this trade with the buy-the-dip entry point at $112.50 or we'll adjust our strategy.

Earlier Comments:
This trade is a bet that investors are willing to buy the dip near the August lows (ignoring the bearish H&S pattern) instead of selling stocks toward the August 2010 lows. We are suggesting readers use a trigger to buy calls on the SPY at $112.50 (just above the 1120 lows on the S&P500 index). More conservative traders could wait for a dip closer to the 1100 level on the index, which is $111.00 on the SPY.

If we are triggered at $112.50 on the SPY we'll use a stop loss at $109.90. Our upside targets are $119.00 and $122.00.

Buy-The-Dip Trigger @ $112.50

- Suggested Positions -

buy the OCT $118 call (SPY1122J118)

Entry on September xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 293 million
Listed on September 10, 2011


PUT Play Updates

Credit Suisse Group - CS - close: 23.74 change: +0.46

Stop Loss: n/a
Target(s): 19.00, 16.00
Current Option Gain/Loss: -27.5%
Time Frame: 4 to 10 weeks
New Positions: see below

Comments:
09/14 update: European stocks were up big today as investors pinned their hopes on a conference call with Germany, France and Greece this afternoon. The leaders of these three countries were discussing if Greece would meet its austerity requirements. The call helped cool recent calls for Greece to leave the Euro zone or default on its debt.

Don't believe the hype. The credit markets are still predicting a default by Greece.

Shares of CS rallied to $24.00 and stalled. This can be used as a new entry point or you could wait for a bounce toward the simple 10-dma and launch positions there instead.

Remember, this is a lottery ticket style of trade. European banks could see a lot of volatility on back and forth headlines regarding the fate of the PIIGS countries and their debt woes.

Earlier Comments:
The credit markets are telling investors that a Greek default is almost guaranteed but no one knows the actual date. It could be this month or it could be six months from now. Therefore, we need to label this CS put play as a speculative, aggressive bet. Greece and the EU do not want the country to default so CS could see a lot of volatility with sharp rebounds on positive headlines but these will be temporary.

With so much potential for volatility I am not listing a stop loss on this trade. Limit your risk by using small positions.

*Small Positions*

- Suggested Positions -

Long DEC $20 PUT (CS1117X20) Entry $2.00*

*09/12 option did not trade today but the $ASK did not move and remained at $2.00 (bid is $1.80)

Entry on September 12 at $22.48
Earnings Date --/--/-- (unconfirmed)
Average Daily Volume = 2.3 million
Listed on September 10, 2011


Stanley Black & Decker - SWK - close: 56.88 change: +1.94

Stop Loss: 58.05
Target(s): 50.25, 46.00
Current Option Gain/Loss: Oct$50: -50.0%, & Oct$55: -41.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/14 update: Bears were on the run in SWK today and the stock added +3.5%. The close over resistance at $56.00 is bullish but the rally stalled at its 10-dma. The high today was $57.67 and we have a stop loss at $58.05.

I would wait for a new drop under $56.00 before considering new positions.

Earlier Comments:
Conservative traders could use a stop closer to $56.50-56.00. Our first target is $50.25. The $50-49 area might be support. Yet I'm setting a secondary target at $46.00. FYI: SWK recently produced a new quadruple bottom breakdown sell signal on its Point & Figure chart, which currently points to a $46 target.

- Suggested Positions -

Long OCT $50 put (SWK1122V50) Entry $1.90

- or -

Long OCT $55 put (SWK1122V55) Entry $3.90

Entry on September 12 at $54.78
Earnings Date 10/18/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on September 10, 2011


CBOE Volatility Index - VIX - close: 34.60 change: - 2.31

Stop Loss: n/a
Target(s): 26.00, 22.50
Current Option Gain/Loss: -100.0%
Second Position Gain/Loss: -100.0%
Third Position Gain/Loss: -98.2%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
09/14 update: The VIX lost another -6.2% but I would not place any new bets on a decline. The stock market might see another Friday sell-off, which would send the VIX higher again. There is no change from my prior comments.

We have less than two weeks left before September VIX options expire on Wednesday, Sep. 21. We are 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.

NOTE: These VIX options expire on Wednesday, September 21st.

- 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 = ---
Listed on August 4, 2011


CLOSED BEARISH PLAYS

Moody's Corp. - MCO - close: 31.65 change: +1.18

Stop Loss: 30.85
Target(s): 26.50 , 25.25
Current Option Gain/Loss: Sep$30: -87.5% & Oct$27: -58.3%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
09/14 update: Another bid day of widespread gains for the stock market helped push MCO to a +3.8% gain. I warned readers that MCO was on the verge of a breakout. Today's rally through resistance hit our stop loss at $30.85 early this morning.

Earlier Comments:
FYI: There are plenty of investors who are bearish on MCO. The most recent data listed short interest at almost 15% of the 183 million-share float. That does raise the risk of a short squeeze. We want to keep our position size small.

The Point & Figure chart for MCO is bearish with a $19 target.

* Small Positions * - Suggested Positions -

SEP $30 PUT (MCO1117U30) Entry $2.00*, exit $0.25* (-87.5%)

- or -

OCT $27 PUT (MCO1122V27) Entry $1.80*, exit $0.75* (-58.3%)

09/14 stopped out @ 30.85
* options did not trade today. this is an estimate
09/10 new stop loss @ 30.85
09/06 *Entry price on these options are estimates. Options did not trade today.

chart:

Entry on September 06 at $28.06
Earnings Date 10/27/11 (unconfirmed)
Average Daily Volume = 4.5 million
Listed on September 3, 2011