Market - Last week, the market did not have to fight off bad economic/credit news and it was able to rally higher on good earnings. Corporations are making great money and balance sheets are strong. Typically, earnings season kicks off with some of the strongest companies reporting early. Economic conditions have been gradually deteriorating and there weren't any major releases last week. That will change a little this week and consumer confidence, durable goods orders, the Beige Book, initial claims, GDP, Chicago PMI and consumer sentiment will be released. Durable goods orders have been volatile and given solid earnings from Ford and Whirlpool, this number should be decent. Initial claims have been seasonally adjusted and there is so much "noise" in the number that traders are ignoring it for the time being. I feel the Beige Book and Chicago PMI could be the numbers to watch this week. They will both show a decline in manufacturing and that could raise concerns of a double dip recession. The European stress test results were released last Friday. In general, the market has been receptive to the study. However, many analysts (myself included) feel that it was nothing more than a public relations move by the ECB. The study assumed that European banks do not have any sovereign default risk. These banks have been aggressively investing in peripheral EU nations and they are very vulnerable if the PIIGS start failing. Last week, the European bond auctions also went well in Ireland and Spain. The previous week, Italy held successful auctions. The yields are rising, but the demand was fairly good. This condition can change in an instant. Portugal held successful bond auctions two weeks ago and last week it auctioned €1.25 billion in one year T-Bill's and the yields jumped 1%. For now, the auctions won't impede this market rally. Before the open, FedEx raised guidance. The market rallied on the news and transportation stocks from airlines to railroads all look fairly strong. Cyclical stocks also caught a bid last week when Caterpillar, Ford and 3M reported good results. Interest rates are so low that Asset Managers feel compelled to invest in the market. Without concrete evidence that we will slip into a double dip recession and without a sovereign default, money is gradually flowing back into stocks. This rally can continue for another week but it will start to hit resistance. Economic conditions are deteriorating in Europe and budget deficits will continue to grow. Austerity programs are being fought tooth and nail and the cuts that have been made don't address the really big issues (retirement benefits and healthcare). The deficits will continue to escalate out of control here and abroad. Consumption in the US will continue to decline. More than 70% of our economic activity comes from spending. Unemployment benefits and severance packages are running out. Corporations are not hiring and the unemployment rate will start to creep higher in coming months. I am waiting for signs of resistance and I will let this rally run as high as it wants to. Option implied volatilities are declining and that plays right into my hand. I feel the next big move is down and I will be ready to buy puts. Only nimble short-term traders using stop orders should trade this rally. The market should hit its first snag Wednesday afternoon when the Beige Book is released. Then, I believe Chicago PMI and consumer sentiment will weigh on the market Friday. Monday, ISM manufacturing will decline and that should raise concerns at the beginning of a busy week for economic releases.

Bullish	DNDN
Stock Option Trading Strategy Sell out of the money put spread.
Stock Option Trade Sell 10 DNDN Aug $34 puts (DNDN 10T34.00) and buy 10 DNDN Aug $30 puts (DNDN 10T30.00) for a net credit of $.90 - Day. I am hoping for a small pullback on the close. If we do not get filled today, I will send new instructios. Filled 7/27/10
Stock Option Target Puts expire
Stock Option Stop Contingent on the stock below $32.70, buy back the puts - GTC.
Stock Description Dendreon Corporation, a biotechnology company, engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients.
Option Trade Rationale The FDA approved Provenge based on the study below. Three Phase 3 studies involving 737 patients were submitted to FDA to support licensure. The pivotal study was the Phase 3 IMPACT (IMmunotherapy for Prostate AdenoCarcinoma Treatment) trial (D9902B), a 512-patient, multi-center, randomized, double blind, placebo-controlled study that evaluated men with asymptomatic or minimally symptomatic, metastatic CRPC. PROVENGE extended median survival beyond two-years, demonstrating a median improvement of 4.1 months compared to the control group (25.8 months versus 21.7 months). Overall, PROVENGE reduced the risk of death by 22.5 percent compared to the control group (HR=0.775). Results from the similarly designed Study D9901 in asymptomatic metastatic CRPC also demonstrated a survival advantage of similar clinical magnitude as the IMPACT study. The side affects were minimal. The safety evaluation of PROVENGE was based on 601 prostate cancer patients in four randomized clinical trials who underwent at least one leukapheresis procedure. The most common adverse events (incidence greater than or equal to 15%) are chills, fatigue, fever, back pain, nausea, joint ache, and headache. Serious adverse events reported in the PROVENGE group include acute infusion reactions (occurring within 1 day of infusion) and cerebrovascular events. In controlled clinical trials, severe (Grade 3) acute infusion reactions were reported in 3.5% of patients in the PROVENGE group. Reactions included chills, fever, fatigue, asthenia, dyspnea, hypoxia, bronchospasm, dizziness, headache, hypertension, muscle ache, nausea, and vomiting. No Grade 4 or 5 acute infusion reactions were reported in patients in the PROVENGE group.
Trading Game Plan The stock tanked on news that Medicaid is conducting a National Coverage Analysis (NCA). That means it may not qualify for coverage and that spooked investors. The $93,000 cost per patient might have prompted the review. There's little chance CMS can refuse to cover Provenge according to its FDA-approved label. Congress has been very specific about how cost may not factor into CMS coverage decisions or FDA approval decisions. CMS knows this well, highlighting this fact in its own guidance documents on the NCA process. Demand for Provenge far outstrips supply with significant waiting lists at every one of the 50 or so authorized facilities. More than 30 million lives are covered for Provenge by both private insurers and Medicare subcontractors. This number is growing every week and includes the top Medicare subcontractor in the nation. The drug has incredible potential and now that it has found support, buyers are starting to come in. The stock could easily be a takeover candidate and those rumors will circulate. I like the base at $29 and I feel the stock could take off at any moment. It is up today and I want to sell the Aug $34 - $30 put spread for $.90
Stock Option Track Record 7/27/10 - Sold 10 DNDN Aug $34 puts (DNDN 10T34.00) and bought 10 DNDN Aug $30 puts (DNDN 10T30.00) for a net credit of $.95. 8/20/10 - The put spread expired and the position was never in danger. the stock continued to grind higher and we made $930 (10 x $.95 less commissions 2 x $10).

Bullish	SPRD
Stock Option Trading Strategy Buy call options
Stock Option Trade Buy 10 SPRD Nov $10 calls (SPRD 10K10.00) @ $1.30 - Day. filled 7/27/10
Stock Option Target Sell 10 SPRD Nov $10 calls @ $1.25 - GTC. Filled 8/27/10
Stock Option Stop None
Stock Description Spreadtrum Communications, Inc., a fabless semiconductor company, designs, develops, and markets baseband processor solutions for the mobile wireless communications market.
Option Trade Rationale In May, the company posted a first-quarter profit Monday, reversing a loss a year earlier as revenue grew more than six-fold. The company earned $6.6 million, or 13 cents per American Depositary share, compared with a loss of $8.3 million, or 19 cents per share, in the same period a year earlier. Adjusted earnings were $8.7 million, or 17 cents per share, in the latest quarter. Revenue jumped to $52.1 million, surpassing the company's forecast of $40 million to $43 million. Year-ago revenue was $8.2 million. The company said improvements to product quality and customer service helped it gain market share during the quarter. For the second quarter, Spreadtrum is forecasting revenue of $65 million to $68 million. The stock trades at a forward P/E of 9.
Trading Game Plan All you have to do is combine China and wireless in the same sentence to get investors excited. This company is growing at an incredible pace. Current Assets exceed Total Liabilities so they have a strong balance sheet. I like the nice breakout above $6.50 in April and rally to $11. After taking a breather for a few weeks, the stock found support at $8 and now it is right back on track. It is up big today on heavy volume and I am expecting the stock to challenge the highs. I want to buy the Nov $10 calls for $1.20.
Stock Option Track Record 7/27/10 - Bought 10 SPRD Nov $10 calls (SPRD 10K10.00) @ $1.25 8/27/10 - We sold 10 SPRD Nov $10 calls @ $1.25 this morning. The stock did not move higher after earnings and we were able to scratch the trade. I don't mind lightening up on long positions ahead of next week. We lost $20 in commissions.