Option Investor
Newsletter

Daily Newsletter, Wednesday, 12/15/2010

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Dollar Rally, Spain Plague Stocks

by Todd Shriber

Click here to email Todd Shriber
Another day in the life of Europe's sovereign debt crisis sent the U.S. dollar higher and stocks lower with the S&P 500 putting the breaks on a six-day rally. When the dust settled on Wednesday, the index was off by half a percent. The Dow Jones Industrial shed 19 points on the day while the Nasdaq lost 10.5 points. Gold was adversely impacted by the dollar's jump, careening to a 1.3% loss. Stats Table

The euro slid against the dollar, helping the U.S. Dollar Index to a solid day. If you're long stocks and commodities or short the dollar, blame Spain for your Wednesday headache. The ''S'' in the PIIGS acronym and the second-largest economy in that motley crew behind Italy dominated the headlines in a big way today on news that Moody's Investors Service is mulling a downgrade of Spain's debt rating.

Throughout this European debt saga, I have opined in this space that it has been frustrating and vexing to see economic lightweights such as Greece, Ireland and Portugal weigh on global equity markets. After all, these aren't lead actors on the global economic stage. I also noted that Spain is a different ballgame, the ninth-largest economy in the world, and if the contagion spread its way, there would be unfortunate repercussions.

The other side of this coin is that Moody's or any other ratings agency for that matter, is not doing anyone any favors by considering a downgrade to Spain's debt rating now. It is practically 2011 and Spain's problems have been well-known for a couple of years. There have been a couple of times in the past year that I have highlighted the iShares MSCI Spain Index Fund (NYSE: EWP), the only Spain-specific ETF listed in the U.S., on days when the ETF has been subject to some unusual bearish trade and I highlighted the reasons why Spain was likely to be on the receiving end of some pain.

In the go-go days of the easy credit economy, Spain went the way of U.S, which is to say ''houses for all.'' When the real estate bubble burst, the same thing happened in Spain that happened here in the States: Folks were stuck with homes that were less than what they paid. Factor in an unemployment rate that is close to if not the highest in the Eurozone (it was once as high as 20%) and it is no wonder Spain is in trouble. Welcome to the party Moody's because these statistics were readily available in 2008. As the chart illustrates, dollar bulls do not care how late these downgrades come because buying the news in this case seems to work.

The timing of all this is quite bad for Spain, which will commence its final bond sale of 2010 on Thursday. Moody's says the country needs to raise $226 billion next year.

Dollar Index Chart

As has been the problem throughout the European fiasco, the problems faced by Spain and friends are not confined to their borders because foreign banks have exposure to these countries as well. In the case of Spain, German banks own almost $217 billion in Spanish debt, French banks own over $200 billion and the U.S. is vulnerable as well with almost $173 billion in Spanish debt holdings, according to the Bank of International Settlements.

Spain Debt Exposure Chart

Belgium is no peach either. Standard & Poor's took the knife to its outlook for Belgium on Tuesday, cutting that rating to ''negative'' from ''stable'' while warning the country could be in for credit rating downgrade within the next six months.

''We believe that Belgium's prolonged domestic political uncertainty poses risks to its government's credit standing, especially given the difficult market conditions many eurozone governments are facing,'' S&P said. Belgium's current credit rating is AA+, just one notch below the perfect AAA rating. It does not look like the country will be obtaining that lofty rating any time soon, but it does look like the iShares MSCI Belgium Index Fund (EWK) is quite vulnerable right now.

Belgium ETF Chart

Staying in Europe, a couple of European companies that are not going to win any popularity contests this year were in the news and not the good kind of news. Well, it is rarely good when the Justice Department gets involved and that is a lesson BP (BP) and Transocean (RIG) are bound to learn. Both stocks were doing alright today until the Justice Department announced it is seeking an unspecified amount of civil damages from BP, Transocean and several other companies with ties to the Gulf of Mexico oil spill.

The suit, filed today in a New Orleans federal court, shows DOJ is pursuing damages under the Clean Water Act and that the agency wants to hold BP, Transocean and Anadarko Petroleum (APC), which owned a 25% non-operating interest in the Macondo well project, liable under the Oil Pollution. BP's Australian-based insurance provider was also named, but Cameron International (CAM) and Halliburton (HAL) escaped the wrath of DOJ, at least for the time being.

BP slid 1% after the news broke, giving back some of Tuesday's gains that were accumulated on the back of takeover rumors. For more extensive coverage, head over to OilSlick.com.

BP Chart

While it may seem like today was a pretty glum day, there is some positive news to report and one such example comes from the materials sector. Joy Global (JOYG), the mining equipment maker whose primary rival, Bucyrus (BUCY), is being acquired by Caterpillar (CAT), reported stellar fiscal fourth-quarter results AND gave an outlook for 2011 that investors cheered.

Wisconsin-based Joy Global said it earned $1.39 a share on sales of $1.05 billion in its fiscal fourth quarter. Analysts were expecting a profit of $1.16 a share on revenue of $922.8 million. That is a pretty good beat, but even better was the outlook. Joy Global said it expects to earn $5-$5.30 a share on revenue of $3.9 billion to $4.1 billion for fiscal 2011. That tops the Street estimate of a profit of $4.79 a share on revenue of $3.86 billion.

Mining companies have increased capital spending this year by as much as 35% and spending is expected to rise another 15%-20% next year as emerging markets continue their thirst for commodities. Analysts said Joy Global will be targeting emerging markets for growth and will probably expand its product line to better compete with the combined Caterpillar/Bucyrus.

Joy Global said its fourth-quarter bookings rose by 48%, driven by North America, Australia and Russia, Reuters reported. The shares surged as much as 8% to a new 52-week high before settling up 6.94%.

Joy Global Chart

Looking at the charts, I do not want to be the one that rains on the rally's parade, but the S&P 500 is having a tough go of things with regard to surpassing 1250. To be specific, 1251.70, the index's close on Sept. 12, 2008, is next resistance. That number is the pre-Lehman collapse high, so it is probably very psychological. Support is fair bit back at 1225-1228.

S&P 500 Chart

Yesterday, the Dow got a small boost from a trio of constituents, Caterpillar, Kraft (KFT) and Verizon (VZ) on some upgrade news. Today it was a trio all falling by at least 1.1% -- Alcoa (AA), General Electric (GE) and JPMorgan Chase (JPM)-- that dragged the index lower. Today's loss is hardly alarming the Dow is still a long way from support at 11,335.

Dow Chart

After eight consecutive up days, the Nasdaq has fallen back for two straight days and today's decline violated initial support at 2625. Some Nasdaq darlings did not pull their weight today. Google (GOOG) retreated below its 50-day moving average. F5 Networks (FFIV) endured a nasty tumble and Apple (AAPL) barely moved.

Nasdaq Chart

It was another down day for the Russell 2000 and the index is now flirting with support at 765. How firm this support is should be a tell as to how strong small-caps will be heading into year-end.

Russell 2000 Chart

As Keene is filling in for me next Monday, I will not be back with you until after Christmas, but I wanted to leave you with a fun, and perhaps profitable, fact. According to Bespoke Investment Group, the trading day before and after Christmas are usually positive for the S&P 500, but make your preference the day before, which sees an average gain of 0.21% as that day is positive almost two-thirds of the time over the past 25 years. Happy holidays to you and your family.

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New Option Plays

Lots of Data

by James Brown

Click here to email James Brown

Editor's Note:

Thursday's session could be interesting. There is a lot of economic data hitting the wires. We'll see the housing starts, building permits, the U.S. current account balance, the Philadelphia Federal Reserve economic survey, and the weekly initial jobless claims. Meanwhile stocks look a little tired. We've been hoping for a correction to offer another entry point to load up on bullish positions. The newsletter already has almost a dozen candidates ready to go with buy-the-dip triggers. I'm not adding any new candidates tonight.

- James


In Play Updates and Reviews

Taking Profits on CHRW

by James Brown

Click here to email James Brown

Editor's Note:

CHRW hit our final target at $79.00. Plus, we want to go ahead and take profits on GWW. The major market indices look vulnerable. Maybe we'll finally see a little pull back.

-James

Current Portfolio:


CALL Play Updates

Cummins Inc. - CMI - close: 108.62 change: +0.33

Stop Loss: 98.40
Target(s): 108.25 114.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: CMI posted another gain but the action looks bearish with a failed rally near $110. Aggressive traders could take the high-risk approach and buy puts with a stop loss above today's high and target a correction toward 105-103. I am suggesting the rest of us just wait for the pull back. We want to buy calls on a dip at $102.50.

We want to start with small positions! Consider only buying half your normal position size. Just in case the correction pulls CMI toward the 50-dma we want to have some cash on the sidelines to double down near the 50-dma.

Trigger @ $102.50

- Suggested Position -
Buy the 2011 January $105 calls (CMI1122A105)

- or -

Buy the 2011 March $110 calls (CMI1119C110)

Entry on December xxth at $ xx.xx
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on December 11th, 2010


CSX Corp. - CSX - close: 63.08 change: -0.54

Stop Loss: 59.75
Target(s): 67.00, 69.50
Current Option Gain/Loss: -24.5% and -18.4%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/15 update: The intraday bounce in railroad stocks failed. CSX is testing very short-term support near $63.00. I am expecting the pull back to continue. We can look for a dip toward $62.00 or the 50-dma currently near $61.35. Wait for this dip or a bounce from this area before considering new bullish positions.

- Current Positions - (We only have a small position open)

Buy the 2011 January $65 calls (CSX1122A65) Entry @ $1.75

- or -

Buy the 2011 February $65 calls (CSX1119B65) Entry @ $2.49

12/13: CSX opened at $64.39
12/11: New Entry Point Strategy. Buy half now.
12/11: New targets: 67.00, 69.50
12/02: New trigger @ 62.50.
12/01: New trigger @ 62.25, New stop @ 59.90, New targets.

Entry on December 13th at $64.39
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 5.9 million
Listed on November 23rd, 2010


CenturyLink, Inc. - CTL - close: 45.79 change: -0.13

Stop Loss: 43.75
Target(s): 44.90, 47.25
Current Option Gain/Loss: +550.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/15 update: Caution! I want to warn readers that the rally in CTL looks tired. Shares did hit new two-year highs again (at $46.26) but CTL is overbought and due for some profit taking. I would expect a correction toward $44.00. Cautious traders may want to exit completely right here. I am not suggesting new positions at this time. Our final target to exit is $47.25.

FYI: Investors should know that CTL is currently involved with a $10.6 billion stock-swap merger with Qwest Communications (Q). The merger isn't supposed to be completed until the first half of 2011. The trend for both stocks is up and naturally looks very similar following the M&A announcement.

Current Position:
Long the 2011 January $45.00 calls (CTL1122A45) Entry @ 0.20

12/14: New stop loss @ 43.75
12/13: First Target Hit @ $44.90, option @ $0.85 (+325%)
12/01: Adjusted secondary target to $49.00

Entry on November 29th at $42x55
Earnings Date 02/22/11
Average Daily Volume = 3.0 million
Listed on November 27th, 2010


Express Scripts - ESRX - close: 54.23 change: -0.63

Stop Loss: 49.65
Target(s): 53.95, 57.25
Current Option Gain/Loss: +28.5%
Time Frame: 5 to 6 weeks
New Positions: Yes, see below

Comments:
12/15 update: There are no surprises here. ESRX slipped toward short-term support near $54.00. I would watch for a correction toward $52.00. If you're looking for a new entry point I would prefer to initiate positions on a dip or a bounce near $53-52.

We currently only have half a position open.

Current Position:
Long the 2011 January $52.50 calls (ESRX1122A52.5) Entry @ $2.10

12/07: Exit the December calls. option @ $2.01 (+64.7%)
12/01: First Target Hit @ $53.95. Dec's @ $2.20 (+80.3%). Jan's @ $3.10 (+47.6%)

Entry on November 18th at $51.81
Earnings Date 02/24/11
Average Daily Volume = 4.3 million
Listed on November 17th, 2010


Fastenal Co. - FAST - close: 59.14 change: +0.15

Stop Loss: 53.75
Target(s): 59.75, 62.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: FAST produced a failed rally under round-number resistance at $60.00. Odds look good that FAST is ready for a little correction. Aggressive traders could take the high-risk approach and buy puts now with a stop loss above today's high to try and scalp two or three points on a pull back. I'm expecting support at $56.00. We have a trigger to buy calls at $56.00. Conservative traders could wait for a dip closer to $55 or $54 before launching positions. If triggered our first target is $59.75.

FYI: FAST announced a special, one-time cash dividend of 42-cents on November 18th and all of the option strikes have been adjusted for this 42-cent dividend.

Trigger @ 56.00

Suggested Positions:
Buy the 2011 January $54.58 calls (FAST1122A54.58)

- or -

Buy the 2011 February $59.58 calls (FAST1119B59.58)

Entry on December xxth at $ xx.xx
Earnings Date 01/19/11 (unconfirmed)
Average Daily Volume = 880 thousand
Listed on December 8th, 2010


FedEx Corp. - FDX - close: 92.39 change: -0.94

Stop Loss: 87.75
Target(s): 94.75, 99.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/15 update: Tomorrow is the big day. FDX reports earnings before the opening bell. Analysts are looking for a profit of $1.31 a share. Expect some volatility at the open. Right now our plan is to buy calls on a dip at $90.25.

Suggested Position: TRIGGER @ $90.25 <-- new trigger

Buy the 2011 January $90.00 call (FDX1122A90) current ask $4.85

- or

Buy the 2011 April $95 call (FDX1116D95) current ask $5.00

Entry on December xxth at $ xx.xx
Earnings Date 12/16/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on November 29th, 2010


Goldman Sachs - GS - close: 165.21 change: -2.12

Stop Loss: 157.45
Target(s): 169.75, 177.00
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: So far so good. We've been expecting GS to pull back from this level. Instead of buying puts we're just waiting for a dip toward support. Our plan is to buy calls on a dip at $163.00. Cautious traders could hope for a dip closer to the $161-160 zone.

Trigger @ 163.00

Suggested Positions:
Buy the 2011 January $170 calls (GS1122A170)

- or -

Buy the 2011 April $175 calls (GS1116D175)

Entry on December xxth at $ xx.xx
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 7.2 million
Listed on December 2nd, 2010


International Business Machines - IBM - close: 145.82 change: +1.54

Stop Loss: 142.99
Target(s): 149.90, 157.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: It was a quiet day for IBM with the stock trading inside yesterday's range. I don't see any changes from my prior comments. We want to see the stock breakout higher from this consolidation. I'm suggesting a trigger to buy calls at $146.75. FYI: The Point & Figure chart on IBM is forecasting a long-term target of $196.

Breakout Trigger @ $146.75

- Suggested Positions -

Buy the 2011 January $150 calls (IBM1122A150)

- or -

Buy the 2011 April $155 calls (IBM1116D155)

Entry on December xxth at $ xx.xx
Earnings Date 01/18/11 (unconfirmed)
Average Daily Volume = 4.7 million
Listed on December 14th, 2010


Juniper Networks - JNPR - close: 35.93 change: +0.18

Stop Loss: 33.75
Target(s): 37.40, 39.85
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: JNPR spiked higher this morning but gains quickly faded. I'm still looking for a correction into the $35-34 zone. We have a trigger to buy calls at $35.20. More conservative traders could wait to buy calls on a dip near $34.00.

Trigger to buy the dip @ $35.20

- Suggested Position -
Buy the 2011 January $35.00 calls (JNPR1122A35)

- or -

Buy the 2011 April $37.00 calls (JNPR1116D37)

Entry on December xxth at $ xx.xx
Earnings Date 01/25/11 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on December 11th, 2010


Nike Inc. - NKE - close: 88.58 change: -0.70

Stop Loss: 83.90
Target(s): 89.50, 94.50
Current Option Gain/Loss: +74.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/15 update: We only have trading days left before NKE reports earnings. We need to seriously consider an early exit ahead of the report instead of taking the risk of holding over the announcement. I am not suggesting new bullish positions at this time. Currently our final exit target is $94.50. I'm considering raising our stop closer to $85 or $86.

(Second position) Current Position:
Long the January $85.00 CALLS (symbol:NKE1122A85) Entry @ $2.78

12/13/10 Target Hit @ $89.64 (gap higher), option @ $5.51 (+98.2%)
12/13/10 New stop loss $83.90
12/11/10 New stop loss $83.49
12/07/10 Exit the December calls, option @ $2.25 (+95.6%)
12/01/10 New stop loss @ 82.45
11/30/10 Readers may want to exit December options early for a gain
11/30/10 Entry on January calls @ $2.78
11/29/10 Buy the bounce from $84.00
11/24/10 Target hit @ 86.75, Dec. option @ $2.60 (+126%)

Entry on November 11th at $83.00
Earnings Date 12/21/10
Average Daily Volume = 2.3 million
Listed on November 6th, 2010


Oceaneering International - OII - close: 73.04 change: -0.78

Stop Loss: 67.75
Target(s): 74.80, 79.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: There is no change from my prior comments on OII. Readers may want to scale back on their position size to limit their risk. We want to buy calls on a dip at $70.25.

Trigger to buy @ $70.25

Suggested Position: Buy the 2011 January $75 calls (OII1122A75)

- or -

Suggested Position: Buy the 2011 April $75 calls (OII1116D75)

Entry on December xxth at $ xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 584 thousand
Listed on December 4th, 2010


Transocean Ltd. - RIG - close: 71.89 change: -0.91

Stop Loss: 66.25
Target(s): 72.50, 78.25
Current Option Gain/Loss: +37.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/15 update: Shares of RIG held up pretty well considering the news today. The U.S. government has decided to file a civil suit against BP for the Gulf of Mexico oil spill this past year. RIG was named as one of the four defendants. Shares of RIG only lost -1.2% on the session. This would suggest that the market believes RIG's liabilities are limited and not too concerning. That can always change but big picture I'm still bullish on RIG. We're not suggesting new positions at this time but watch for support near $68 or the 50-dma. Our final target is $78.25.

- Current Position -
Long the 2011 January $70.00 calls (RIG1122A70) Entry @ $2.95

12/11/10 New target 78.25, new stop loss $66.25
12/03/10 Target hit @ $72.50, option @ $4.95 (+67.7%)

Entry on November 30th at $68.18
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 6.3 million
Listed on November 29th, 2010


Sherwin-Williams Co. - SHW - close: 81.00 change: +1.62

Stop Loss: 73.75
Target(s): 79.90
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: Wow! SHW continues to outperform - without us! Talk about frustrating. The action this morning almost looks like a short squeeze. The stock appears to have rallied to new all-time highs and on big volume. We do not want to chase this move. However, we will raise our buy-the-dip trigger to $77.00.

Trigger @ $77.00 <-- new trigger

Suggested Positions:

Buy the 2011 January $75.00 calls (SHW1122A75)

- or -

Buy the 2011 March $80.00 calls (SHW1119C80)

Entry on December xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 675 thousand
Listed on December 9th, 2010


Union Pacific - UNP - close: 91.44 change: -0.13

Stop Loss: 87.90
Target(s): 96.25, 99.75
Current Option Gain/Loss: - 11.8%
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/15 update: Profit taking in UNP on Wednesday was very mild but make no mistake the short-term trend is down. The intraday bounce failed at the 10-dma. I have been warning readers to look for a dip toward the next level of support near $90.00. Wait for the dip near $90.00 or wait for the bounce before considering new bullish call positions. If you do initiate positions I would buy the February calls. More conservative traders might want to consider a tighter stop loss.

- Current position -
Suggested Position:
Buy the 2011 January $95 calls (UNP1122A95) Entry @ $1.52

Entry on November 30th at $89.83
Earnings Date 01/20/11
Average Daily Volume = 2.9 million
Listed on November 20th, 2010


United Parcel Service - UPS - close: 72.25 change: -0.35

Stop Loss: 66.85
Target(s): 74.75, 78.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
12/15 update: There is no change from my prior comments on UPS. The stock could see some volatility tomorrow as traders react to earnings news from FDX.

UPS should have support near broken resistance at $70.00. Currently our plan is to buy calls on a dip at $70.25 but I might reconsider if UPS bounces near $71.00 again.

Trigger @ 70.25

Suggested Position:
Buy the 2011 January $70.00 call (UPS1122A70)

- or -

Buy the 2011 April $75.00 call (UPS1116D75)

Entry on December xxth at $ xx.xx
Earnings Date 02/01/10 (unconfirmed)
Average Daily Volume = 3.9 million
Listed on December 6th, 2010


United Technology Corp. - UTX - close: 78.95 change: +0.10

Stop Loss: 73.90
Target(s): 81.50, 84.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: There is no change from my prior comments on UTX. Currently our plan is to buy calls on a dip at $77.10. Cautious traders could wait for a pull back closer to $76.00 or even $75.00.
FYI: The Point & Figure chart is bullish with a $91 target for UTX.

Trigger to buy calls @ $77.10

Suggested Position: Buy the 2011 January $80 calls (UTX1122A80)

- or -

Suggested Position: Buy the 2011 February $80 calls (UTX1119B80)

Entry on December xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 3.2 million
Listed on December 4th, 2010


Vulcan Materials Co. - VMC - close: 46.39 change: -0.98

Stop Loss: 39.95
Target(s): 47.75
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Comments:
12/15 update: We have been waiting for VMC to correct lower. That correction may have begun today. Our plan is to buy calls on a dip at $43.75 but we might want to raise that trigger above $44.00 and possible support at the simple 200-dma.

Trigger @ $43.75

Suggested Position: Buy the 2011 January $45 calls (VMC1122A45)

- or -

Buy the 2011 February $45 calls (VMC1119B45)

Entry on December xxth at $ xx.xx
Earnings Date 02/07/11 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 13th, 2010


Cimarex Energy Co. - XEC - close: 87.30 change: +0.96

Stop Loss: 79.85
Target(s): 87.40, 89.90
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/15 update: If the market looked a little bit healthier I would be tempted to buy calls on XEC right here. The stock is bouncing from support near $85.00 and look poised to rally higher. However, the major averages look vulnerable. I would rather wait and see if we get a better entry point on a dip near $84.00.

Trigger @ 84.00

Suggested Position:
Buy the 2011 January $85 calls (XEC1122A85)

- or - Buy the 2011

Entry on December xxth at $ xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 907 thousand
Listed on December 1st, 2010


PUT Play Updates

Expedia Inc. - EXPE - close: 25.69 change: +0.13

Stop Loss: 27.75
Target(s): 25.10, 24.25
Current Option Gain/Loss: +41.6%
Time Frame: 2 to 3 weeks
New Positions: No

Comments:
12/15 update: After two days of declines EXPE managed a little oversold bounce. The stock actually rallied toward its 100-dma intraday but then pared its gains. I am not suggesting new bearish positions at current levels. We have two targets. Our first target is $25.10.

Current Position: Buy the 2011 January $25 Put (EXPE1122M25) Entry @ $0.60

Entry on December 8th at $26.88
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 2.5 million
Listed on December 7th, 2010


CLOSED BULLISH PLAYS

CH Robinson Worldwide Inc. - CHRW - close: 78.52 change: +0.06

Stop Loss: 74.45
Target(s): 74.90, 79.00
Current Option Gain/Loss: +226%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/15 update: Once again the trading gods have smiled on us. A mid-afternoon spike sent shares of CHRW to $79.21. Our final exit target was $79.00. This play is closed and not a day too soon. The action today looks like a potential short-term top in CHRW. I would keep this stock on our watch list since the long-term trend is still up. A correction back toward $75.00 or the 50-dma might offer a new entry point. FYI: Our option hit an intraday high of $4.00 (exit @ $3.75).

Closed Position:
Long the January $75.00 calls (CHRW1122A75) Entry @ $1.15, exit @ $3.75 (+226%)

12/15: Final target hit @ $79.00, option @ $3.75 (+226%)
12/14: New stop loss @ 74.45
12/11: New stop loss @ 72.90
12/01: New Stop loss @ 71.90
12/01: First target hit @ $74.90 Exit all December calls: $0.95 (+111.1%)
12/01: First target hit, take profits on January calls: $ $2.00 (+73.9%)
11/27: New stop @ 70.75, new first target at $74.90

chart:

Entry on November 22nd at $72.44
Earnings Date 02/03/11
Average Daily Volume = 1.1 million
Listed on November 18th, 2010


W.W. Grainger Inc. - GWW - close: 135.38 change: +0.55

Stop Loss: 124.75
Target(s): 129.90, 138.50
Current Option Gain/Loss: +164.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/15 update: Hmm... traders have a decision to make right now. The stock market looks like it is starting to correct lower. The pull back could be a couple of days or it could be a couple of weeks. No one knows the future. In the meantime GWW displayed relative strength and hit another high. Do you take profits now in GWW with the option up +164% or do you hang on? Our longer-term market bias is bullish but these GWW options expire in five weeks. You have to make your own decision. The relative strength in GWW is tempting. I'm choosing the defensive decision to exit now. We were aiming for $138.50. Let's exit now. We can re-evaluate a new trade on a dip back toward the $128 area. (Officially, we'll update our exit for tomorrow morning.)

Closed Position:
Long the 2011 January $130 calls (GWW1122A130) Entry @ $2.50, exit $6.60 (+164%)

12/15: Exit early @ $135.38, option @ $6.60 (+164%)
12/14: New stop loss @ 127.25
12/02: First target hit @ 129.90, option @ $4.10 (+64%)
12/02: New stop loss @ 124.75, New final target at $138.50

chart:

Entry on November 24th at $126.75
Earnings Date 01/25/11 (unconfirmed)
Average Daily Volume = 567 thousand
Listed on November 22nd, 2010