July 2012 | Members

Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades.  Please remember, ALL “Exit Targets” and “Stop Targets” are targets.  You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one.  We will send out a “Profit Alert” or “Trade Update” if we want you to close a position OR if a new trade comes out.  Otherwise, follow instructions at all times in the 9am and 1pm updates.  Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames.

Special Notice:  The market is closed on Wednesday for the July 4 holiday so traders will need to decide if they want to be long or short ahead of Thursday’s economic news. 

The MBA Mortgage Index numbers are due out at 7am but it will be a big day for the labor market.  The Challenger Jobs Cuts and ADP Employment Change Report numbers are due out at 7:30am and 8:15am, respectively, followed by Initial and Continuing Claims at 8:30am. If these numbers come in worse-than-expected, we could have a huge selloff at the start of Thursday’s action.  If they match expectations or come in better, the market will rally.

Friday will also be vulnerable to headline risk as Nonfarm Private Payrolls, the Unemployment Rate, Hourly Earnings and Average Workweek, all hit the wire at 8:30am.  The action from Thursday will dictate Friday’s direction, most likely, so the market could move 2%-3% each day. 

We were able to close 4 winning trades last week which got our track record to 104-21 for the year and an 83% win rate but we could get trapped with some of the July puts if there is a continued rally.  Since we are in July put options for a few of our trades, this will be the week we need a big pullback or face the risk of writing them off. 

We opened 6 new August puts last week and we still feel fairly confident about as we do believe the market will be at new lows by the end of summer, but, we could be wrong with some of our July picks if we don’t get a huge pullback soon. 

Of course, this does not help new subscribers, we know this, but we have warned this is a choppy and volatile market.  Also, these trades are not over which is why we tell traders not to get too emotional when they are down.  There have been quite a few positions that we have seen this year lose 70% only to come back and return a profit.  Remember, we are not DAILY market timers, we try to play options on where we think the market will be in a month or two. 

Our subscribers keep track of other newsletters and we are highly ranked on options services who track newsletters.  The major services recommend a lot more trades then we do and usually have track records under a 50% win rate if they have track records at all.  They don’t care if you make money or not.  We do and we are in the trades with you.

We say this because many of you are nervous as we are in put options.  We understand this but we don’t get nervous and we don’t flinch.  Our track record for over 5 years shows a success rate of 75% for all of our trades. 

Please continue to send emails and we will help you as much as we can with any questions you may have but this is where we are and why we haven’t bought call options.  We cannot help when you sign up with us but we went 8-1 for June with our Arena call options returning us 464%.  We are 40-2 since late March with 10 triple-digit winners, including a 527% return on Green Mountain Coffee Roasters put options. 

July could be choppy for us, but remember, we still have 17 days before anything is officially a loss.  We may be the only newsletter calling for a 20% pullback by September and it’s not often we are wrong when calling market direction.  If we are right, these options will be just fine.  If not, we will go back to the drawing board with our next batch of trades.   

We will not be doing an afternoon update unless something major happens today and we are hopeful when we meet again Thursday morning the bears will be growling.  We hope everyone enjoys the holidays and be safe.

 

PowerShares QQQ (QQQ, $64.35, up $0.19)

August 59 puts (QQQ120818P00059000, $0.40, down $0.05)

Entry Price:  $0.75 (6/27/12)

Exit Target:  $1.50

Return:  -47%

Stop Target:  None  

Action:  We would like to see $65 hold but there is risk to $67.  The August options have 45 days before they expire and we are expecting a drop below $60 by then.   

 

AOL (AOL, $28.41, up $0.33)

August 24 puts (AOL120818P00024000, $0.40, down $0.05)

Entry Price:  $0.53 (6/26/12)

Exit Target:  $1.00

Return:  -25%

Stop Target:  None

Action:  We expect resistance to hold at $28 but there is risk up to $30.  We are still looking for a test to $26 over the near-term and then $24.   

 

Consumer Discret Select Spider (XLY, $43.91, up $0.13)

August 41 puts (XLY120818P00041000, $0.40, down $0.05)

Entry Price:  $0.80 (6/25/12)

Exit Target:  $1.60

Return:  -50%

Stop Target:  None

Action:  There is risk to $45 but we are expecting a test to $40 over the next week or two; mid-$30’s by August.   

 

iShares Dow Jones US Real Estate (IYR, $64.20, up $0.27)

August 57 puts (IYR120818P00057000, $0.30, flat)

Entry Price:  $0.85 (6/25/12)

Exit Target:  $1.70

Return:  -65%

Stop Target:  40 cents

Action:  We said there could be a test to $64 which was hit on Friday.  There is further risk to $65 but we are expecting a fade below $60 by mid-August.

 

KLA-Tencor (KLAC, $48.95, down $0.30)

August 43 puts (KLAC120818P00043000, $0.55, flat)

Entry Price:  $0.90 (6/25/12)

Exit Target:  $1.80

Return:  -39%

Stop Target:  45 cents

Action:  We are expecting a close below $45 by week’s end.

 

Illinois Tool Works (ITW, $52.06, down $0.83)

July 50 puts (ITW120721P00050000, $0.45, up $0.10)

Entry Price:  $1.05 (6/4/12)

Exit Target:  $2.10

Return:  -57%

Stop Target:  None

Action:  Shares traded to a low of $51.72 yesterday and we are still expecting a test to $48 before these options expire.

 

Other 2012 Portfolio OPEN positions (10):  These are trades that are still open in the portfolio but are down over 50%.  They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around.  This means we would not open any new positions.  We are still keeping track of the trades and we will record the results, accordingly, when we close them or if the options expire.  Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

 

E*Trade Financial July 12 calls (from March 2012)

Bank of America January 12.50 calls 2013, July 12 calls (from March 2012)

Apollo Group August 27 puts (from May 2012)

Best Buy July 16 puts (from May 2012)

First Solar July 10 puts (from May 2012)

FedEx July 77.50 puts (from June 2012)

Potash July 35 puts (from June 2012)

iShares Russell 2000 July 70 puts (from June 2012)

Facebook July 24 puts (from June 2012)

Coinstar July 60 puts (from June 2012)

 

WATCH LIST SECTION

These trades are NOT recommendations.  They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices.  We try not to have more than 12-15 open trades at any one time which is why we created a Watch List.  We will not list entry prices because these stocks are on the verge of breaking out or they could sell off but these are the trades we are watching as new
candidates.

 

Aetna (AET, $38.57, down $0.20)

August 36 puts (AET120818P00036000, $0.75, up $0.05)

Thoughts:  Shares could be on the verge of collapsing with a possible test to the lows $30’s.  We may add these options if shares fall below $38.

 

Monster Beverage (MNST, $74.78, up $3.58)

August 60 puts (MNST120818P00060000, $0.90, down $0.50)

August 90 calls (MNST120818C00090000, $0.55, up $0.15)

Thoughts:  We like this trade as a possible strangle option trade as we a big move coming for shares of Monster.

 

Wellpoint Health Networks (WLP, $62.26, down $1.53)

August 57.50 puts (WLP120818P00057500, $0.90, up $0.10)

Thoughts:  We are looking for a drop below $60, possibly $55.

 

Health Care Select Sector Spider (XLV, $38.13, up $0.12)

August 38 calls (XLV120818C00038000, $0.75, down $0.05)

August 37 puts (XLV120818P00037000, $0.30, down $0.05)

Thoughts:  A move above $38 would be bullish while a break below $36 could spell trouble.   

 

McKesson (MCK, $95.03, up $1.28)

July 95 calls (MCK120721C00095000, $1.10, up $0.40)

Thoughts:  This is a possible choice for a healthcare play as shares are near a decade high.  The chart is showing a possible breakout to blue-sky territory and could reach triple-digits.

 

Freeport-McMoRan Copper & Gold (FCX, $33.88, down $0.19)

August 31 puts (FCX120818P00031000, $0.75, down $0.05)

Thoughts:  We like this trade and would like to see a test to $35 which is where we might give Freeport another ride.

 

Netflix (NFLX, $67.85, down $0.64)

August 50 puts (NFLX120818P00050000, $0.90, flat)

July 60 puts (NFLX120721P00060000, $0.50, down $0.05)

Thoughts:  If shares fall below $65 a quick test to $50 could be in the cards.   

 

Schlumberger (SLB, $64.94, up $0.03)              

August 57.50 puts (SLB120818P00057500, $0.80, down $0.05)

Thoughts:  We may be getting an opportunity for a quick trade so stay ready.