1:15pm (EST)

The market has traded in a tight range today, mostly to the upside as today’s calendar is light on economic news and earnings releases are a non-factor.  As we head into the second half of action, it appears trading could be limited as both the bulls and bears gear up for a bevy of economic news over the next couple of days.

The weekly report on initial jobless claims will come out before the opening bell tomorrow and the market will be bracing for 2Q gross domestic product as well as the Chicago Purchasing Managers’ Index (PMI) on Thursday.  

Friday will be full of headline news with the Commerce Department reporting on August construction spending, personal income and spending are due out, and September auto sales.  Additionally, the University of Michigan will update the consumer sentiment in September and the Institute for Supply Management will release its September manufacturing index.

As a result, the Dow is down 8 points to 10,849 but has traded to a low of 10,801.  The 10,800 had acted as resistance and is current support but the bears a looking to get back below this level.

The S&P 500 is down a point to 1,147 and has traded to a low of 1,040 but is struggling with the 1,150 level.  The Nasdaq is flat at 2,379.


In earnings news, Family Dollar Stores (FDO, $44.44, up $1.10) is up nearly 3% after reporting profits of $74 million, or $0.56 a share, versus $60 million, or $0.43 a share, in the year earlier period.   Revenues were up 8% to $2 billion.   Wall Street had been expecting earnings of $0.51 a share.  The company also said it expects 2011 earnings of $2.95-$3.15 a share, versus expectations for a $2.96 a share.

Of course, the one stock we were focused on this morning was Green Mountain Coffee Roasters (GMCR, $31.41, down $5.60) which is down over 15% following the disclosure of a SEC investigation.


This morning we talked about a possible play on the GMCR October 30 puts (GMCR101016P00030000, $1.02, up $0.94) as a “day trade” or even a “half hour trade”.  Yes, it would have been nice to get into them yesterday as they are up over 1,000%…

We said shares had a shot at sinking to $30 but have “only” traded down to $30.55 after opening at $31.60.  That was a full $1 we had a chance to play “cheap” out-of-the-money” puts options on.

We said the put options would probably open near $1 or higher and that “they could be good for a quick trade today even after the open”.  The put options closed at 8 cents on Tuesday and opened up this morning at 80 cents BUT…traded as high as $1.46. 

Folks, this is 80+% pop if you had got in at the open and out near the highs.  You could have even bought the puts and then set a limit price to sell them at $1.20 which still would have been a 50% pop in less than an hour.

These trades are risky but if you take the emotion out of them and know that you are just going to be in a trade for an hour or so then take the money and run.  We don’t often profile these types of trades as official recommendations because of the degree of risk and it is hard to tell if the profit zone is only for an hour or less, or, if it is an option that has further potential.

We talk about these “situations’ in our trading manual How to Trade Options on Momentum Stocks which is due out Friday.

We will be back in the morning with another full update but don’t forget we get the initial jobless claims report at 8:30am (EST)!