Market Outlook

Indicators are giving neutral to bullish readings for options trading investors, a big improvement from last week’s neutral to bearish. The primary changes were the major indexes rising back above their 50-day moving averages. These moves were confirmed by the 200-day Moving Averages Index, which moved back above its own 200-day moving average and thus is now giving a neutral signal rather than bearish.

Recommended Fast Options Trade: Leap Wireless (NASDAQ: LEAP)

LEAP has broken above heavy resistance at $14.30 and looks like it will continue moving higher if stocks continue to rally. Here is the best way to play more strength in Leap Wireless …

I recommend that you buy the LEAP May 16 Call up to $1 ($100 per contract).

After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $17.10. That should give you an option price of about $2.10, for a 110% profit.

Close this position and cut losses if the stock closes below $14, when the option price should be about 50 cents. The stock is currently trading at $15.02. The computer-simulated probability of this option hitting its target price is 23%.

Find more option analysis and trading ideas at Options Trading Strategies.

Recommended Fast Options Trade: Aflac Inc. (NYSE: AFL)

AFL has fallen sharply and has broken below its 200-day moving average. It bounced back over the past couple days but could continue its downward path if it is unable to break above resistance at $53.40. Here is the best way to play more weakness in Aflac …

I recommend that you buy the AFL May 50 Put up to $1.60 ($160 per contract).

After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $48.20. That should give you an option price of about $3.70, for a 131% profit.

Close this position and cut losses if the stock closes above $55.50, when the option price should be about 90 cents. The stock is currently trading at $53.07. The computer-simulated probability of this option hitting its target price is 17%.

** All of our short-term recommendations can be taken for up to three days after they are recommended. Make sure the stock and option prices are close to where they were when we made the recommendation. If after three days you still have not gotten the position filled, cancel the order and wait for our new recommendations, as the profit probabilities may no longer be valid.

Please go to Page 2 for more of Ken Trester’s option trading ideas.

Action to Take on Current Position: Humana (NYSE: HUM)

For HUM, continue to hold the HUM May 70 Call. The position reached its three-week maximum holding period Thursday without hitting its target price, however it is still trading at its recommended buy price and has almost two months until it expires. Raise the stop price on this position to $64.30.

Action to Take on Current Position: Royal Caribbean Cruises (NYSE: RCL)

For RCL, continue to hold the RCL Jun 38 Put. The position reached its three-week maximum holding period Thursday without hitting its target price, however it is still trading near its recommended buy price and has almost three months until it expires. Lower the stop price on this position to $43.10.

Action to Take on Current Positions: Cracker Barrel Old Country Store (NASDAQ: CBRL), Oshkosh Corp. (NYSE: OSK). Close the CBRL Apr 45 Put and the OSK Jul 29 Put. The stocks closed above their stop prices Thursday.

A Special Note to my Subscribers — Be sure to join me at The MoneyShow in Las Vegas, May 9 — 12, 2011. This exclusive event will be held at the beautiful Caesars Palace, and allows you to choose from dozens of experts and hundreds of educational sessions on every investment topic imaginable. Just one idea from this show could pay for your entire trip, and then some!

To secure FREE admission for you and a companion call 800-970-4355 and mention priority code 021808.

Don’t forget to stop by the InvestorPlace Media Booth #401 in the Exhibit Hall to chat with us in person!

Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.