(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

Ultra(Long)-S&P500 - SSO - close: 37.08 change: +0.37 stop: n/a

Why We Like It:
The S&P 500 has rallied to its 2009 highs and what has been significant resistance at the 1100 level. This could be a major turning point for the market. A breakout over 1100 could ignite a new leg higher. If the S&P 500 fails here again it could spark a sharp correction. If we use a strangle on the market then we don't care what direction is goes.

Initially I was going to use the S&P 500 SPDRs (SPY) but put options were significantly more expensive than the calls. If we use the SSO the price for puts and calls is a lot closer to even. I'm suggesting strangle positions in the $36.50-37.50 zone. We'll use December options. Readers may want to consider January options.

Suggested Options:
We want to buy both the December $40 calls and the December $34 puts. Our initial cost is estimated at $1.70. We want to sell if either option hits $3.00 or higher.

BUY CALL DEC 40.00 SUC-LN open interest=1661 current ask $0.77
BUY PUT DEC 34.00 SOJ-XH open interest=1934 current ask $0.93

Annotated Chart:

Picked on  November 11 at $ 37.08
Change since picked:       + 0.00
Earnings Date            --/--/--
Average Daily Volume =         32 million  
Listed on  November 11, 2009