Options Outlook For Week of October 13

* The week ended on a terrible note with -.7% drop in the Dow, -1.2% in S&P and Small Caps but a whopping -2.5% drop in the Nasdaq. This despite the efforts of Apple which held green almost all day but not many other stocks joined the fight. * The week was undoubtedly bearish and the score board shows it. All indices have broken long standing trends. The Small Caps are 13% lower than the highs. The SPX & NDX are almost 6% off this year's highs. So now what? Markets are at the mercy of momentum. Unfortunately, traders are hit with negative headline after negative headline that add fuel to the fire. The snow ball is getting bigger so Bulls need a break from new headlines to find footing. Each of those headlines is not strong enough to kill a bull market but all together and at the same time is like dying by a thousand cuts. * Levels are important. The SPX is sitting on its 200 day moving average - the level that a lot of traders have been anticipating. This coming week should tell markets if this will be a buy-able dip or the start of something more serious. * Friday's blood shed started with a warning from Microchip (MHCP). It was down over 12% on the day but caused a massive sell off of all chip companies. Best illustrated by a -9% drop in Intel in minutes. Intel closed -5% on the day. So traders sold everything without asking questions. * How to trade from here? For a portfolio that is biased long needs to build defense. This can be done via the options market. Buying puts or put spread in the tickers traded or in indices. Short-biased portfolios should be booking profits and eyeing new opportunities perhaps on the long side but without rush. Could candidates would be tickers who traded strong on a bloodshed Friday. A few names include: CMG, EBAY, SBUX, AAPL, etc.Traders should be caution and small in their choices. Also one needs to pay attention to earnings dates and trade accordingly. Earnings trades are pure guess work since no one can forecast how the markets will react to the numbers regardless if they meet, beat, or warn on outlook. This week Tesla was red on a huge green day and that was a flag to short it via buying puts. Indeed when markets sold off on Friday, Tesla led down faster and harder and the puts paid big time. Check out the video below for a bull recap of this week's outlook: