9:00am (EST) continued…

The Nasdaq gave back a Jackson (20 points), or 0.7%, to finish at 3,053.  We were looking for the 3,050 level to hold but Tech did trade down to 3,045 which opened the door for a test to 3,025-3,000.  The bulls will try to push 3,075 today but resistance has been rough waters up to 3,100.

The Russell 2000 slipped a half-dozen points, or 0.8%, to settle at 806.  The bulls defended the 800 level as they gave way to 804 but not holding 810 could be an omen.  There is risk down to 780 while the 820 level represents serious overhead resistance. 

The S&P Volatility Index ($VIX, 15.96, up 0.85) jumped 6% and kissed a high of 16.45.  It will be crucial for the bulls to hold 17.50 or there could be panic.

From the “Dropped the Ball” department:

We have profiled Big Lots (BIG, $38.47, up $0.04) off and on this year and on Wednesday we failed to go back to the well on a possible big payday.  In our Weekly Wrap we highlighted in BOLD the company would be reporting earnings this week but we fumbled when we went to hand it off to our Daily for the Watch List. 

Needless to say, Big Lots shares fell big-time, over 20%, and we missed out on the September 35 puts (BIG120922P00035000, $5.20, up $4.78) which zoomed 1,138%.  Yes, the put options closed on Wednesday at 42 cents and they traded up to $5.50 yesterday.

Although our Weekly Wrap is a covered call publication, the newsletter is full of juicy tidbits as we cover the fundamentals and chart work on 2 new companies a week along with our current trades, market outlook, and what’s ahead for the upcoming week along with possible earnings plays.

With 2Q earnings winding down, the 3Q earnings cycle won’t be until October but there will still be companies reporting earnings in September and there could be possible earnings warnings. 

As we head to press, futures look like this:  Dow (-22); S&P 500 (-4); Nasdaq 100 (-5).  We may have some Trade Alerts for both our Weekly and Daily today so stay ready this morning. 

 

MEMBERS AREA

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.

 

Cymer (CYMI, $56.50, down $2.15)

September 55 puts (CYMI120922P00055000, $1.65, up $0.45)

Entry Price:  $1.42 (8/23/12)
Exit Target:  $2.25+
Return:  16%
Stop Target:  70 cents

Action:  Shares traded to a low of $56.05 yesterday while the options reached $1.77.  We would like to see shares close below $55 today.  

 

Caterpillar (CAT, $87.63, down $1.09)

September 82.50 puts (CAT120922P00082500, $0.78, up $0.15)

Entry Price:  $0.73 (8/23/12)
Exit Target:  $1.50
Return:  7%
Stop Target:  None

Action:  Shares traded to a low of $87.14 while the options reached 90 cents.  We believe shares are on the way to test $80 again once $85 is taken out.

 

Knight Capital Group (KCG, $2.86, up $0.09)

January (2013) 2.50 call (KCG130119C00002500, $0.60, up $0.05)

Entry Price:  $0.55 (8/21/12)
Exit Target:  $1.10
Return:  9%
Stop Target:  None

Action:  There is risk down to $2 but we have a 6-month target of $4.  The company recently lost $440 million in a trading software snafu which required some of the big boys to take a stake in the company so that it could be saved.  We are hearing trading levels at Knight are back to normal as the firm is first or second in its sector.  This is a possible “lottery” play on shares trading back to $4 or $5 and overall volume picking back up in the market once the suit-and-ties come back from their August vacations.  If shares trade near $4 by mid-January we should get an easy double on our call options.

 

WellPoint (WLP, $58.73, down $0.84)

September 60 calls (WLP120922C00060000, $0.65, down $0.20)

Entry Price:  $0.70 (8/21/12)
Exit Target:  $1.40
Return:  -7%
Stop Target:  None

Action:  Shares fell to a low of $57.40 but didn’t give back all of Wednesday’s gains.  We will stick with the trade as long as $55 holds and we are looking for a run past $60 by mid-September.

 

Amgen (AMGN, $83.66, down $0.21)       

September 85 calls (AMGN120922C00085000, $1.05, down $0.05)

Entry Price:  $0.80 (8/20/12)
Exit Target:  $1.50 (closed half at $1.10 on 8/22/12)
Return:  34%
Stop Target:  80 cents (Hard Stop on other half)

Action:  We have a Hard Stop of 80 cents on the other half to protect profits in case shares slip from here.  The calls opened at $1 and traded down to 89 cents yesterday. 

 

Pepsico (PEP, $72.66, down $0.23)

October 75 calls (PEP121020C00075000, $0.45, down $0.05)

Entry Price:  $0.50 (8/16/12)
Exit Target:  $1.00
Return:  -10%
Stop Target:  None

Action:  We will stick with the October calls as long as $71.50 holds.  We still believe shares will push $75 over the near-term but a break below $72 would be bearish.  Yesterday’s low was $72.50.

 

Veeco Instruments (VECO, $33.20, down $0.22)

September 30 puts (VECO120922P00030000, $0.65, flat)

Entry Price:  $0.90 (8/2/12)
Exit Target:  $1.35-$1.80
Return:  -28%
Stop Target:  None

Action:  Veeco traded to a low of $32.74 yesterday.  We are looking for a close below $32.50 today which should get $30 and the high $20’s in play for next week.

 

Other 2012 Portfolio OPEN positions (5):  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.

 

Dow Jones Industrial Average Spiders September 119 puts (from July 2012)

S&P 500 Spiders September 123 puts (from July 2012)

Wynn Resorts September 80 puts (from August 2012)  

Apollo Group September 24 puts (from August 2012)

 

Bank of America January 12.50 calls 2013 (from March 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.

 

AOL (AOL, $32.79, up $0.41)

September 33 calls (AOL120922C00033000, $0.80, up $0.15)

September 32 puts (AOL120922P00032000, $0.70, down $0.15)

Thoughts:  Watch for a move below $31 to possibly play the puts while a break above $33 could be used to play another breakout.  We might also make this as a strangle option trade because it looks good at current prices.

 

Netflix (NFLX, $64.05, down $1.35)

September 72.50 calls (NFLX120922C00072500, $0.80, down $0.25)

Thoughts:  Watch for a break above $67 before going long.  A move below $62.50 would be bearish.

 

Fusion-io (FIO, $28.99, down $0.32)

September 32 calls (FIO120922C00032000, $0.70, down $0.15)

Thoughts:  A break above $30 might get us back in some more call options.

 

Taiwan Semiconductor Manufacturing (TSM, $14.33, down $0.07)

January 15 calls (TSM130119C00015000, $0.70, flat)

Thoughts:  We are waiting for a close above $14.75 before possibly going long.

 

Buffalo Wild Wings (BWLD, $74.77, down $1.12)

September 80 calls (BWLD120922C00075000, $0.50, down $0.25)

September 70 puts (BWLD120922P00070000, $0.80, up $0.15)

Thoughts:  This might also be a good time to play a strangle trade on Buffalo Wild Wings. 

 

Broadcom (BRCM, $35.21, up $0.04)

September 36 calls (BRCM120922C00036000, $0.65, flat)

September 33 puts (BRCM120922P00032000, $0.43, flat)

Thoughts:  The 52-week high is $39.66.  We would wait until shares clear $36 before going long and on a break below $34 we might look to go short.

 

Akamai Technologies (AKAM, $37.13, down $0.83)

September 38 calls (AKAM120922C00038000, $0.90, down $0.35)

November 45 calls (AKAM121117C00045000, $0.70, down $0.15)

January 45 calls (AKAM130119C00045000, $1.25, down $0.20)

Action:  Shares pulled back a little yesterday and a break below $35 would end the recent bullish trend.

 

KLA-Tencor (KLAC, $53.06, down $0.21)

September 55 calls (KLAC120922C00055000, $0.65, flat)

September 50 puts (KLAC120922P00050000, $0.45, flat)

Thoughts:  Shares look headed to double-nickels ($55) and a blue-sky breakout could be in the mix.  A move below $52 would reverse the recent uptrend.