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Mon: Top Buys DOW LYO COP KBH DHI PFE CMOS Top Sells SPY IWM DIA

Primary Trades:

Long-term calls with short-term puts may be the best way to trade the current market.

Calls: The following are fundamentally undervalued. DOW Sep 40 calls, which closed at 1.05, have huge leverage and much safety. DOW may rise into the low 40s in Jul. LYO is another chemical firm and the Sep 22.5 calls at 1.30 may be best. LYO may rise two or three points. High oil prices are negative for chemical firms. COP Jul 60 calls at 3.10 may be best. COP may rise above 65. Both KBH and DHI may bounce several points short-term. The KBH Jul 45 calls at 2.40 and the DHI Jul 22.5 calls at 2.80 may be best. PFE Jan 22.5 calls at 2.30 may be a buy.

Puts: SPY IWM and DIA each rose over three points in two days. Perhaps, one or two point in-the-money Jul puts are best (since the options are heavily traded and typically fairly priced).

Secondary Trades:

The CMOS Jul 2.5 calls are about 100% intrinsic value.

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Primary Trade: An intermediate or long term trade. Timing can be off substantially. Volatility not a factor. Risk is low to moderate. Potential return is often moderate.

Secondary Trade: A short term trade. Timing must be accurate or volatility must be high. Risk is high. Potential return is high.

Secondary Trades should be generally avoided, although considered. Note: If Secondary Trades are taken, they may affect Primary Trades.