10:45pm (EST) In what started out as a “steady” day for the bulls turned out to be a disaster waiting to happen. I have been warning of keeping an eye on the exit door in case the bull market takes a break and the exit door just opened. Just how many people on Wall Street decide to run out remains to be seen. The market has struggled holding its support lines and I have been mentioning them almost daily here in the Blog. In Sunday night’s Weekly Wrap I had this to say: “The widely tracked S&P 500’s break below 900 was not a good omen and after failing to bust through its 200-day Moving Average, the index is now battling to hold its 50-day MA. The key numbers you want to watch are 875-880. If the S&P fails this level and earnings come in worse-than-expected then we could see a sell-off.” The S&P closed at 881, down 18 points, or 2%. That is about as accurate as you can get, folks. I have been profiling more put options of late and this has been the reason why. To you newbies, when trading options you want to buy calls when the market is going up and you buy puts when the market is going down. Of course, it isn’t always THAT simple but you get my drift. The S&P 500 rolled over and fell below its 200-day moving average once again and the afternoon sell-off was just what we have been expecting. I have been profiling the The PowerShares QQQ’s (QQQQ, $34.53, down $0.88) July 36 puts (QQQSJ, $1.50, up $0.56) all week and I told you to use these once we got a break to the downside. These put options have traded under a $1.00 both days and if you saw the break in the market today or got in early then you just made 50% on your money. We still might see some fight from the bulls this week but the bears have ’em on the ropes. Speaking of dropping like a rock…you guys are going to hate me for this but some of our astute options traders that follow the Blog have been emailing me and thanking them for the trade in American International Group (AIG, $13.75, down $2.44). For you readers that just signed up, last week I did a couple of write-ups on AIG when the stock was at $18. The stock was at a $1 when the company did a 1-for-20 reverse and here is what I said before the holiday weekend: “When a company does a reverse split, they normally don’t turn out to well, meaning, the fundamentals haven’t changed. If the fundamentals or outlook hasn’t changed, what makes the stock attractive? I’m not sure if we get a repeat performance if and when they do list options on the stock again but there may be an opportunity down the road to make something on a stock worth much of nothing.” (END) Well, I had told you that some of the financial sites hadn’t listed any options on AIG but I did check the CBOE (Chicago Board Options Exchange) on Thursday and forgot to follow up on them. Some of our readers shorted the stock when it was at $18 last week and some of you bought options. Great job. The July 18 puts (AIGSR, $4.60, up $1.80) were going for $1 and change on Thursday when the stock was at $18 and closed yesterday at $2.80. Today, they added another 65%. The July 15 puts (AIGSO, $2.53, up $1.54) traded over 1,000 contracts (plenty of volume) today and they gained over 150% from Monday’s close. I can’t take credit for the option trades because I didn’t list them but I can GIVE credit to those of you who used the blog to do your own homework. I certainly didn’t expect AIG to drop like a rock so fast but the stock has lost 50% in two days. I haven’t heard many talking heads mentioning this fact so they will probably be talking about it later in the week. AIG did all of the short sellers a huge favor when they did the reverse stock split and I wanted to make sure I mentioned this to you. I can’t catch every trade but I’m trying to teach you to be you own trader. Remember this down the road when and if another company decides to do a reverse stock split. As you can see, once you learn the tricks of the trade you will become a better option trader. That’s all I have for tonight, people. I have a busy day on Wednesday (what else is new?) but I will do a morning Blog. The afternoon blog might be sketchy but I will be back Wednesday night, regardless. Rick@MomentumOptionsTrading.com]]>