Editor's Note:

Shares of Baidu.com (BIDU) hit our bearish exit target on Friday. We also closed our HUM trade to lock in a profit. VZ was triggered and I have removed AMGN and MJN as candidates.

The stock market is looking oversold here and due for a bounce. Readers will want to seriously consider taking profits now on our bearish put positions.

Current Portfolio:


CALL Play Updates

Verizon Communication - VZ - close: 41.53 change: +0.16

Stop Loss: 39.95
Target(s): 45.75
Current Option Gain/Loss: Jun$42c: - 3.3% & Jul$43c: -21.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
05/19 update: Our new trade on VZ has been opened. The stock gapped open higher at $41.61. Our trigger was $41.55 so the play was opened immediately. Shares rallied to $42 before paring its gains. The relative strength is encouraging. More conservative traders could wait for a dip near $41.00 or the 10-dma before launching new positions.

More conservative traders may want to use a stop closer to $40.50 instead. Keep in mind that VZ does not move super fast so we'll need to show some patience.

- Suggested Positions -

Long Jun $42 call (VZ1216F42) Entry $0.60

- or -

Long Jul $43 call (VZ1221G43) Entry $0.66

05/18/12 triggered on gap higher at $41.61 (trigger was 41.55)

chart:

Entry on May 18 at $41.61
Earnings Date 07/19/12 (unconfirmed)
Average Daily Volume = 13.8 million
Listed on May 17, 2012


PUT Play Updates

Fiserv, Inc. - FISV - close: 64.61 change: -0.72

Stop Loss: 67.25
Target(s): 63.50
Current Option Gain/Loss:(May$70p: +12.5%) & Jun65P: +105.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/19 update: The correction in FISV seems to be gaining a little momentum. Shares broke down and closed under the $65.00 level on Friday. I am lowering our stop loss to $67.25.

Our exit target is $63.50 but more conservative traders may want to take profits now (currently +105%). Aggressive trades could aim for the $61-60 zone instead.

- Suggested Positions -

- previously closed position -
May $70 put (FISV1219Q70) Entry $3.02 exit $3.40 (+12.5%)

- or -

Long Jun $65 put (FISV1216R65) Entry $0.90

05/19/12 new stop loss @ 67.25
05/17/12 new stop loss @ 68.25
05/15/12 closed May $70 puts at the open: bid @ 3.40 (+12.5%)
05/14/12 prepare to exit the May $70 puts at the open tomorrow
05/07/12 triggered on gap down at $67.26 (our trigger was 67.40)

chart:

Entry on May 07 at $67.26
Earnings Date 05/01/12
Average Daily Volume = 693 thousand
Listed on May 05, 2012


General Dynamic - GD - close: 63.34 change: -0.38

Stop Loss: 66.05
Target(s): 61.50
Current Option Gain/Loss: +66.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/19 update: Another day, another decline for GD. Shares are looking oversold here. Readers may want to take profits now. When the market bounces we could see GD rally back toward the $65-66 zone. I am inching our stop loss down to $66.05.

- Suggested Positions -

Long Jun $65 PUT (GD1216R65) Entry $1.50

05/19/12 new stop loss @ 66.05
05/17/12 new stop loss @ 66.55
05/15/12 triggered @ 65.75

chart:

Entry on May 15 at $65.75
Earnings Date 07/25/12 (unconfirmed)
Average Daily Volume = 1.9 million
Listed on May 09, 2012


Informatica - INFA - close: 41.57 change: -0.70

Stop Loss: 45.25
Target(s): 40.25
Current Option Gain/Loss: +70.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/19 update: INFA inched lower on Friday and closed down -1.6% to set a new three-month low. Our exit target is $40.25 but more conservative traders may want to exit early now to lock in a gain. If the market does see an oversold bounce we could easily see INFA bounce back toward the $44 or $45 levels.

- Suggested Positions -

Long Jun $45 PUT (INFA1216R45) Entry $2.40

05/19/12 readers may want to take profits now
05/16/12 new stop loss @ 45.25
05/14/12 triggered at $44.50

chart:

Entry on May 14 at $44.50
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 1.3 million
Listed on May 10, 2012


iShares Russell 2000 ETF - IWM - close: 74.69 change: -0.71

Stop Loss: 78.75
Target(s): 72.00-70.00 zone
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
05/19 update: Thus far the IWM is moving the direction we expected. It's just moving lower a lot faster than expected. I don't want to chase it here even though Friday was bearish with a close under technical support at the simple 200-dma. I strongly suspect the market is going to see an oversold bounce soon and that's when we will want to buy puts.

We will tentatively put a trigger to buy puts at $76.75 with a stop loss at $78.75.

Trigger: buy puts on a bounce at $76.75, stop 78.75

- Suggested Positions -

buy the Jul $75 PUT (IWM1221S75)
05/19/12 adjusted strategy: buy puts on a bounce at $76.75, stop 78.75
05/17/12 temporarily wait on buying puts. We will re-evaluate tomorrow.

chart:

Entry on May xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 53 million
Listed on May 12, 2012


Siemens AG - SI - close: 83.56 change: +0.54

Stop Loss: 87.75
Target(s): 80.25
Current Option Gain/Loss: +18.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
05/19 update: European stocks just had their worst week of the year. Thus I am surprised that SI managed an oversold bounce on Friday of +0.6%. The trend is down but shares remain oversold. Look for short-term resistance at the simple 10-dma near $85.80. I am not suggesting new positions at this time. FYI: The Point & Figure chart for SI is bearish with a $74 target.

- Suggested (SMALL) Positions -

Long Jun $80 PUT (SI1216R80) Entry $1.35

05/16/12 SI gapped open higher at $84.94

chart:

Entry on May 16 at $84.94
Earnings Date --/--/--
Average Daily Volume = 832 thousand
Listed on May 15, 2012


Tiffany & Co. - TIF - close: 60.64 change: +0.57

Stop Loss: 63.55
Target(s): 59.00
Current Option Gain/Loss: +11.5%
Time Frame: exit prior to the May 24th earnings report
New Positions: see below

Comments:
05/19 update: TIF managed an oversold bounce off of round-number support at the $60.00 level on Friday. We only have three days left for this trade since we're planning to exit prior to the earnings on May 24th.

I am not suggesting new positions. Please not our new stop loss at $63.55.

- Suggested Positions -

Long Jun $60 put (TIF1216R60) Entry $2.35

05/19/12 new stop loss @ 63.55, only 3 days left
05/17/12 TIF is testing $60 readers may want to take profits now
05/16/12 new stop loss @ 64.25
05/14/12 TIF gapped down at $61.67, under our trigger.

chart:

Entry on May 14 at $61.67
Earnings Date 05/24/12 (confirmed)
Average Daily Volume = 1.5 million
Listed on May 12, 2012


CLOSED BULLISH PLAYS

Amgen Inc. - AMGN - close: 69.15 change: -1.39

Stop Loss: 69.40
Target(s): 74.90
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
05/19 update: The market's sell-off is accelerating and AMGN is breaking down from its recent trading range. It's possible that shares might bounce off their 50-dma but it's not worth taking a chance here. I'd rather remove AMGN now. We can choose to add it back later if the stock improves. Shares never hit our trigger to buy calls.

Trigger @ $71.50 (small positions)

Trade never opened.

05/19/12 removed from the newsletter
05/17/12 adjusted trigger to $71.50.

chart:

Entry on May xx at $ xx.xx
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 3.9 million
Listed on May 08, 2012


Mead Johson Nutrition - MJN - close: 81.00 change: -1.53

Stop Loss: 82.25
Target(s): 89.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
05/19 update: We have a similar situation with MJN. The plan was to buy calls on a breakout higher. The stock is dropping instead thanks to the market's widespread decline. Friday saw a breakdown below the 50-dma. I am removing MJN from the newsletter. Our trade did not open.

Trigger @ 85.05

Trade did not open.

05/19/12 removed MJN from the newsletter.

chart:

Entry on May xx at $ xx.xx
Earnings Date 07/26/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on May 16, 2012


CLOSED BEARISH PLAYS

Baidu, Inc. - BIDU - close: 115.37 change: -2.03

Stop Loss: 125.50
Target(s): 115.50
Current Option Gain/Loss:(May125P: +128.5%) & Jun120P: +181.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/19 update: Target achieved.

It was a volatile day for BIDU. Shares rallied past $121 on Friday morning but reversed and eventually closed down another -1.7%. Our exit target was hit at $115.50.

- Suggested Positions -

- previously closed position-
May $125 put (BIDU1219Q125) Entry $2.10, exit $4.80 (+128.5%)

- or -

(closed on Friday, May 18th, 2012)
Jun $120 put (BIDU1216R120) Entry $2.95, exit $8.30 (+181.1%)

05/18/12 exit target hit at $115.50
05/17/12 new stop loss @ 125.50, adjust exit to $115.50
05/14/12 planned exit to sell our May $125 puts at the open this morning.
They opened with a bid at $4.80 (+128.5%)
05/12/12 new stop loss @ 130.25
Prepare to exit May $125 puts at the open on Monday, current bid $4.05
05/08/12 BIDU gapped open lower at $127.01

chart:

Entry on May 08 at $127.01
Earnings Date 07/25/12 (unconfirmed)
Average Daily Volume = 5.0 million
Listed on May 07, 2012


Humana Inc. - HUM - close: 74.53 change: -1.15

Stop Loss: 80.25
Target(s): 71.50
Current Option Gain/Loss: Jun80p: +66.6% Jun75P: +73.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
05/19 update: Hmm... it looks like I may have been a little bit early with our exit. On Thursday I suggested we exit our HUM positions at the open on Friday since I was expecting a potential oversold bounce off the $75.00 level. Instead HUM has continued to sink and lost another -1.5%. Our trade is closed and HUM remains short-term oversold here.

- Suggested Positions -

Jun $80 put (HUM1216R80) Entry $3.00 exit $5.00 (+66.6%)

- or -

Jun $75 put (HUM1216R75) Entry $1.15 exit $2.00 (+73.9%)

05/18/12 scheduled exit at the open
05/17/12 Prepare to exit positions at the open tomorrow
05/16/12 new stop loss @ 80.25

chart:

Entry on May 10 at $79.56
Earnings Date 07/30/12 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on May 09, 2012