Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/18/2011

Table of Contents

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

Market Wrap

Earnings Misses Fail To Deter Market

by Jim Brown

Click here to email Jim Brown
Earnings misses and news Steve Jobs is still sick failed to push the market lower. The bad news bulls are alive and well.

Market Statistics

The big news for the day was the medical leave announcement by Apple CEO Steve Jobs. Steve survived pancreatic cancer a couple years ago and the board was very bad about not disclosing any material information at the time. Jobs had an operation and a liver transplant and returned in what was claimed was good health but he remained thin and gaunt and the rumors of a continued illness followed him and the company. He eventually took some time off for a "hormone imbalance" and the shares rebounded again when he returned. This time the announcement came out before the rumor mill had a chance to really ramp up although there were some who believed his health was declining again.

His announcement this weekend claimed he was taking an indefinite leave of absence to focus on his health. No medical condition was specified leaving investors to speculate his pancreatic cancer had returned. Over 39,000 people in the U.S. contract pancreatic cancer every year and 37,000 die from the disease. Since Jobs has already had this and had a portion of his pancreas removed, most would not give him a very good chance of beating it a second time. This would be a prime example that all the money in the world won't help when your number is called.

Apple shares fell -$22 at the open to $326 but that was still better than the -10% dip overseas on Monday. Shares rebounded to close at $341 ahead of earnings. After the bell Apple crushed earnings and guided higher. Earnings were $6.43 per share compared to the $5.37 analyst estimate. Revenue rose +71% to $26.74 billion and more than $2 billion over estimates. Apple sold 16.24 million iPhones an 86% increase. They sold 7.33 million iPads, 19.45 million iPods and 4.13 million Macs. The company said there was still a significant backlog of orders for the iPhone 4 and they could not fill the demand. With the iPhone 5 due out in June they are about to run into production problems where they will have to quit making 4 so they can tool up for 5.

On the conference call the COO Tin Cook said Asia was critical to Apple's future sales. For the last quarter China, Hong Kong and Taiwan generated $2.6 billion in revenue a 400% gain over the same quarter in 2009. Cook said 80% of the Fortune 100 companies are testing iPads in the enterprise space or have already begin integration of the devices. (My son's company just provided iPads to all its upper level employees.)

Apple is predicting a profit of $4.22 in Q1. That is down sequentially because Q4 is always Apple's biggest quarter for sales thanks to holiday shoppers. Apple said it finished the quarter with $60 billion in cash and investments. After the earnings shares traded as low as $327 and as high as $357 before closing at $345 and only $4 higher than the regular close.

Apple is a strong company with a great future but this has been built on the amazing business decisions made by Steve Jobs. With the company not disclosing the nature of his illness everyone will assume the worst. The SEC even launched a probe into Apple during the prior illness for lack of adequate disclosure. I would be worried that the lack of disclosure again will weaken the stock again now that the lure of earnings is not there to provide support.

Apple Chart

Also after the close IBM posted earnings of $4.24 per share and beating analyst estimates of $4.08 per share. Earnings were $5.26 billion and revenue was a billion over expectations. Order backlogs rose +$5 billion to $142 billion. Sales of mainframe computers jumped +69% led by sales of the new System Z. That system has 96 cores running at 5.2 Gigahertz and is billed as the fastest corporate mainframe you can buy.

An increase in service contracts suggests the corporate world is starting to spend money again. IBM signed contracts worth $22 billion in the quarter for an 18% increase. IBM's sales are a good indicator of the health of the corporate world. Companies don't commit to millions in new hardware and consulting services unless they are confident about the future.

IBM said it was taking business away from Hewlett Packard thanks to its broader package of hardware and services. However, analysts claim Accenture is winning service business from IBM so who really knows for sure.

IBM Chart

Not all the earnings news was good. CREE reported a +47% rise in profits but sales, profits and guidance fell short of expectations. Earnings were 55-cents compares to analyst estimates of 58-cents. Cree is a large manufacturer of LED lights and sales overseas have been falling thanks to increased competition from China resulting from huge subsidies to Chinese companies. Cree lowered expectations for the current quarter to 38-45 cents and analysts had been expecting 58-cents. Cree shares fell -$11 after the earnings report. This is a prime example of why you should not hold an option position over earnings.

CREE Chart

Citigroup lost ground after it reported earnings of 4-cents compared to analyst estimates for 8-cents. Citi blamed the lower earnings on lower than expected trading in bonds and higher expenses. Citi also blamed it on the rising cost of its debt. Stock trading also took a hit with the equity proprietary trading desk seeing a -24% decline in revenues. Citigroup shares fell -6% on the news and helped to keep most banking sector shares in negative territory. The NYSE volume was 5.6 billion shares and 1.81 billion of those were Citigroup shares. Volume was very heavy in Citi. The stock just moved over $5 last week and back into the realm where all mutual funds could buy it. That illusive goal evaporated today with a close at $4.80.

Citigroup Chart

Meredith Whitney issued a buy rating on a big bank today. Yes, you read that correctly. The banking bear is losing her fur coat. Whitney upgraded JP Morgan to a buy from outperform based on improving economic conditions and improving credit quality. This was her first upgrade since Goldman in 2009. She said there was an "abundance of evidence that earnings had stabilized" at JPM. The only other financial stocks she rates a buy are MasterCard and Visa.

Ameritrade profits rose +6.5% to $145 million or 25-cents per share and inline with estimates. Revenue rose +5.1%. The key point from the Ameritrade earnings was the return of the retail investor. Daily customer trades in Q4 averaged 370,000 and that was +50,000 above the volume in Q3. Even better the CEO said that volume has risen to 439,000 in Q1 and a gain of another 70,000 trades per day. He said the retail investor was putting money back into equities and the trend was very strong. 40% of the money flows were in to U.S. equities and out of bonds.

Ameritrade Chart

Charles Schwab Corp (SCHW) also reported earnings but theirs fell -27% due to a charge for the settlement of a court case on its YieldPlus Fund. Earnings were $119 million or 10-cents compared to $164 million and 14-cents in the year ago quarter. Schwab said client trades had risen only 2% compared to the +11% gains by Ameritrade. Schwab reported a gain of 225,000 new accounts for the quarter compared to 164,000 new accounts at Ameritrade.

Schwab Chart

AIG announced the bankers the government had chosen to handle the $20 billion secondary offering. Goldman, Bank America, Deutsche Bank and JP Morgan will all co-host the underwriting. In an unusual move they will be all be book-runners and the fee is rumored to be in the 50-75 basis point range. That is very low but given the size of the offering it is still a lot of money. However they slice it up the amount of money involved in the offering is going to be a significant hit for the market. Take out $20 plus billion out of circulation and put it into a single stock and the rest of the market will take the hit.

AIG Chart

Cargill announced it was going to spin off its 64%, $24 billion stake in Mosaic (MOS). Cargill is a private company. By spinning off Mosaic they are trying to diversify their investments and maintain that private status. The shares of Mosaic will be distributed to Cargill shareholders, the family trusts, and to Cargill debt holders. They will also be exchanged for Cargill shares and for debt. The plan then allows the shares to be traded on the secondary market over a period of time.

Analysts believe this provides an opportunity for someone to make a run at Mosaic. The potential suitors always include BHP Billiton and Rio Tinto. Mosaic CEO also said on a conference call there was a provision in the deal to allow Mosaic to be sold before the two-year window had expired. However, any potential deal would have to be high enough to compensate for the tax impact on the private shareholders. This is seen as putting a floor under the price for Mosaic with only positive moves ahead. BHP tried to acquire Potash for $39 billion and failed. Mosaic was seen as unavailable given the 64% ownership by Cargill.

Mosaic Chart

Bonds took a serious hit around 9:15 this morning when a $6 billion sale of long dated maturities hit the market. Analysts initially believed it was a fat finger trade but the exchange said no, it was a real trade. Yields spiked sharply with the spread between the 30-year yield and 2-year yield hitting a record wide. After the exchange said it was a valid trade analysts then focused on a possible rate lock scenario. With up to $25 billion in corporate securities coming to market this week it could have been a bank selling treasuries to lock in the rate. This is called "rate locking" and it is a common practice in big offerings. Strange I did not read a single analyst that claimed it was an investor moving out of bonds in favor of equities.

Yield Chart on 30-year Treasury

The economics today were mixed but positive. The January NY Empire Manufacturing Survey came in better than expected at 11.9, up from 10.6 in December. New orders rose by a whopping 10 points to 12.4 and the employment index rose from -3.4 to +8.4.

The NAHB Housing Market Index was level in January for the third consecutive month. Compared to the risk of a decline given the negative impact of winter weather this was mildly bullish. Buyer traffic actually increased but only slightly.

The market had every chance to sell off today. Citigroup missed estimates by 50%. Apple's CEO has disappeared onto another medical mystery tour. Cree blew their earnings and knocked the Intel bloom off the chip sector. The bad news was there and if the market was as fragile as the bears would have you believe this was a perfect opportunity for a decline.

Instead the indexes, including the Apple weighted Nasdaq, posted gains with the exception of the Russell, which lost 0.01 point. Apple's opening decline did penalize the Nasdaq for a 15-yard loss but it recovered.

The Dow, S&P and Nasdaq all closed at a new two-year high. The bad news bulls are alive and well at least for the time being. If that $6 B sale in bonds is any indication the trend is accelerating towards equities and away from bonds. That means the long-term future of equities is growing brighter. Short term is still questionable due to the lack of a meaningful bout of profit taking but long term is very positive.

The S&P closed at 1295 and very close to round number resistance at 1300. I can visualize the bears poised with their finger on the sell button for Wednesday when IBM pushes the Dow and S&P higher. Support is now 1275.

S&P-500 Chart

The Dow ended with a +50 point gain but that was not the real story. The Dow slammed into an invisible wall at 11850 and was unable to penetrate it all day. I don't know why this level suddenly appeared as intraday resistance but it was rock solid. I could have seen this occurring at 11900 and the converging resistance but somebody was sitting on it well in advance of that level.

Dow Chart - 15 min

Dow Chart - 90 Min

The Nasdaq survived the early decline of Apple and the big drop in F5 Networks and Cree. This was the real world equivalent of dodging a bullet. Unfortunately in the case of Apple that bullet may come around again now that the earnings are behind us. Great earnings but now there is a cloud over Steve Jobs health once again and there is nothing to keep investors motivated. Any day now we could get a rumor that his cancer has returned and it is terminal. That would be a very bad day for Apple. Since the company has decided not to disclose any more info the worst will be assumed. There was also no announcement of a stock split as some had expected. I would not be surprised to see Apple retest support at $300 over the coming weeks.

Resistance on the Nasdaq is 2775-2800 and support well back at 2725. That is plenty of room for some volatility without disrupting the longer-term trend.

Nasdaq Chart

In summary I think we were lucky today. We could have sold off on various events but the bad news bulls persevered and we moved higher. The IBM and Apple earnings after the close undoubtedly had a lot to do with keeping investors motivated. How that plays out for the rest of the week is a mystery that will slowly unfold. Having the bulls win today was good for overall market sentiment and could be a factor in drawing some more money out of bonds and into equities. If we do see a dip in the near future I would see it as a buying opportunity.

Jim Brown

Send Jim an email


New Option Plays

Business Software and IT

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Cognizant Technology Solutions - CTSH - close: 75.51 change: +0.50

Stop Loss: 73.90
Target(s): 79.90, 83.50
Current Option Gain/Loss: Unopened
Time Frame: 2 to 3 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
The market continues to march higher no matter what the news. The NASDAQ continues to outpace the S&P 500. I'm very cautious but still optimistic here and want to focus on the tech sector tonight. CTSH just rallied toward the top of its trading range near $76.50. I am suggesting a trigger to buy calls at $76.65. If triggered we'll use a stop loss at $73.90. This is an aggressive play and likely to be a short-term trade that only last a few days. We do not want to hold over the early February earnings report.

If triggered at $76.65 our first target are $79.90. Keep your position very small to limit your risk. The Point & Figure chart for CTSH is bullish with a $105 target.

- Suggested Positions (very small positions only!) -

Trigger to open positions @ 76.65

Buy the 2011 February $75.00 call (CTSH1119B75) current ask $3.00

- or -

Buy the 2011 February $80.00 call (CTSH1119B80) current ask $1.00

Annotated Chart:

Entry on January xxth at $ xx.xx
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on January 18th, 2010


In Play Updates and Reviews

Targets Hit as Stocks Bounce Back

by James Brown

Click here to email James Brown

Editor's Note:

The market recovered from its intraday lows. BA and ESRX hit our exit targets. We had plans to exit calls on GS and IBM, both with gains. Plus I'm suggesting an early exit in XEC to lock in a gain.

CAT and WYNN hit our breakout triggers to buy calls. There are new stops on AMZN and SPW.

-James

Current Portfolio:


CALL Play Updates

Amazon.com Inc. - AMZN - close: 191.25 change: +2.50

Stop Loss: 183.40
Target(s): 192.50, 199.75
Current Option Gain/Loss: +13.6%, and +11.6%
Time Frame: 4 to 6 weeks
New Positions: See below

Comments:
01/18 update: AMZN opened a little bit lower this morning but managed a quick rebound. Shares outperformed the NASDAQ with a +1.3% gain today and a new all-time closing high. Speaking of highs AMZN hit $191.60 intraday. Our first target to take profits is at $192.50. Please note that I am raising the stop loss to $183.40. No new positions at this time.

FYI: Our January $190 calls have turned positive again with a bid at $2.67.

- Suggested (SMALL) positions -

Long the 2011 January $190 calls (AMZN1122A190) Entry @ $2.35

- or -

Long the 2011 February $200 calls (AMZN1119B200) Entry @ $3.85

01/18: New stop loss at $183.40
01/15: New stop loss @ 181.80, New targets 192.50, 199.75

Entry on December 28th at $182.10
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume = 5.0 million
Listed on December 27th, 2010


Caterpillar - CAT - close: 96.23 change: +2.66

Stop Loss: 92.25
Target(s): 99.80
Current Option Gain/Loss: + 21.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/18 update: It's about time! CAT finally showed some relative strength and broke out past resistance at $95.00. Our trigger to buy calls was hit at $95.15. The play is open with a stop loss at $92.25. If you missed our entry point you could buy calls now or wait for a dip near the $95.50-95.00 zone since $95.00 should now be new short-term support. Our target to exit is $99.80. More aggressive traders could aim higher. Keep in mind that earnings are on the 27th of January and we don't want to hold over the event.

Triggered @ 95.15

- Suggested Positions -

Long the 2011 February $100 calls (CAT1119B100) Entry @ $1.45

Chart:

Entry on January 18th at $ 95.15
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume = 4.2 million
Listed on January 5th, 2010


Cummins Inc. - CMI - close: 113.85 change: +1.29

Stop Loss: 108.75
Target(s): 117.50
Current Option Gain/Loss: -50.8% and + 9.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: CMI was showing some strength this morning with a rally past $114.00. The stock eventually pared its gains but still outperformed the major averages. If you're holding January calls you have to decide - do you sell now and recoup 50% of our investment? Or do you hold on with hopes that CMI will trade over $115.00. We'll probably need to see CMI trade closer to $116.00 to actually recoup all of our initial investment. We only have three trading days left.

(small positions only to limit our risk)

- Suggested Positions -
Buy the 2011 January $115 calls (CMI1122A115) Entry @ $1.12

- or -

Buy the 2011 March $115 calls (CMI1119C115) Entry @ $4.73

01/04: New entry point on afternoon bounce.
01/01: Adjusted targets to $114.50, 117.50
12/27: CMI opens at $110.18
12/25: Buy calls now at current levels (small positions)
12/21: New entry point @ $110.25, New stop @ 108.75, New option strikes.

Entry on December 27th at $110.18
Earnings Date 02/02/11 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on December 11th, 2010


FedEx Corp. - FDX - close: 95.80 change: -0.03

Stop Loss: 91.75
Target(s): 99.90, 104.75
Current Option Gain/Loss: -87.5% and - 3.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/18 update: As a group the transports were underperforming on Tuesday. FDX dipped back toward round-number support near $95.00. We only have three days left before our January calls expire. I have been suggesting that we sell our January calls at 40 cents.

I remain cautious on FDX and would hesitate to open new bullish positions.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $100 call (FDX1122A100) Entry @ $0.80

- or

Buy the 2011 April $100 call (FDX1116D100) Entry @ $2.96

01/13: New targets for the April calls (99.90 and 104.75)
01/12: New stop loss @ 91.75
01/08: New exit strategy for January calls. Try to exit at 40 cents or more.
12/17: FDX opens at $94.23 - our entry point.
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Entry on December 17th at $94.23
Earnings Date 12/16/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on November 29th, 2010


International Business Machines - IBM - close: 150.65 change: +0.65

Stop Loss: 146.40
Target(s): 154.50, 159.90
Current Option Gain/Loss: +87.4%, and +27.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: Our plan was to exit our January calls today at the closing bell to avoid holding over IBM's earnings report this evening. The January $150 calls closed with a bid of $2.53 (+87.4%). We would keep our April calls with targets to take profits at $152.50 (see below) and $159.50.

After the closing bell IBM reported earnings that were 10 cents better than expected with a profit of $4.18 a share. Revenues were $29.0 billion, also ahead of expectations. The stock was seen trading $155.00 after hours. Given this after hours surge I am moving our first target for the April calls to take profits from $152.50 to $154.50 and we'll adjust the final target to $159.90. No new positions at this time. I'm adjusting our stop loss to $146.40.

- Suggested Positions -

2011 January $150 calls (IBM1122A150) Entry @ $1.35, exit @ $2.53 (+87.4%)

- or -

Long the 2011 April $155 calls (IBM1116D155) Entry @ $2.25

01/18: New stop loss @ 146.40. New targets at $154.50 and $159.90
01/18: As planned, exit the January calls (+87.4%)
01/13: Exit the January calls on Tuesday before the close (& earnings)
01/06: New stop loss @ 144.75
01/03: New targets @ $152.50, and $159.50

Chart:

Entry on December 29th at $146.75
Earnings Date 01/18/11 (confirmed)
Average Daily Volume = 4.7 million
Listed on December 14th, 2010


Intrepid Potash, Inc. - IPI - close: 39.34 change: +0.76

Stop Loss: 34.75
Target(s): 39.90, 42.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
01/18 update: Hmm.... IPI is marching higher without us and we don't want to chase it. It might be time to give up on IPI as a candidate. At the moment our plan is to buy calls on a dip at $37.25. Our first target is $39.90. Our second, more aggressive target is $42.00.

FYI: The Point & Figure chart for IPI is bullish with a $62 target.

Trigger @ 37.25

- Suggested Positions -

Buy the 2011 February $40 calls (IPI1119B40) current ask $1.25

Entry on January xxth at $ xx.xx
Earnings Date 03/01/11 (unconfirmed)
Average Daily Volume = 717 thousand
Listed on January 12th, 2010


Juniper Networks - JNPR - close: 37.95 change: -0.78

Stop Loss: 36.70
Target(s): 39.90, 41.75
Current Option Gain/Loss: -43.5% and + 4.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: It was not a good day for JNPR. Lackluster analyst comments helped fuel an early morning decline. JNPR failed to bounce back like most of the market this afternoon. The stock is hovering near short-term support at $38.00. More conservative traders will want to seriously consider an early exit right now if you're holding January calls. We only have three trading days left before January options expire. I am not suggesting new positions at this time.

Officially, we want to sell all of our January calls and half of our April calls at $39.90.

- Suggested Positions (only small positions so far) -

Buy the 2011 January $38.00 calls (JNPR1122A38) Entry @ $0.78

- or -

Buy the 2011 April $40.00 calls (JNPR1116D40) Entry @ $1.50
01/15: New stop loss @ 36.70
01/06: New stop loss @ 35.75, new 1st target @ 39.90.
12/17: JNPR opens at $36.91
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Entry on December 17th at $36.91
Earnings Date 01/25/11 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on December 11th, 2010


Millicom Intl. Cellular - MICC - close: 97.12 change: +0.02

Stop Loss: 93.75
Target(s): 99.90
Current Option Gain/Loss: -21.7% and +21.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/18 update: MICC's performance today was pretty underwhelming. I am suggesting that we exit our January calls tomorrow at the closing bell. I am not suggesting new positions at this time. Our target for the April calls is $99.90.

FYI: It looks like MICC must have had a special dividend because several of the options have odd strike prices ending in .40.

- Suggested Positions -

Long the 2011 January 95.40 calls (MICC1122A95.4) Entry @ $2.30

- or -

Long the 2011 April $100.00 calls (MICC1116D100) Entry @ $3.30

01/13: New stop loss @ 93.75
01/06: New stop loss @ 92.49
01/03: New stop loss @ 91.75, New target at $99.90

Entry on December 23rd at $94.23
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 518 thousand
Listed on December 22nd, 2010


NetApp, Inc. - NTAP - close: 58.99 change: -0.49

Stop Loss: 54.90
Target(s): 62.25, 64.50
Current Option Gain/Loss: -11.6%
Time Frame: 4 to 5 weeks
New Positions: Yes, see below

Comments:
01/18 update: NTAP underperformed the market on Tuesday with another failed rally near $60. I would expect another pull back toward the $57-56 level. Let's wait and see how NTAP performs tomorrow before considering new positions. Cautious traders might want to consider a stop loss closer to $56 instead. Our exit targets are $62.25 and $64.50.
The Point & Figure chart for NTAP is bullish with a $66 target.

- Suggested Positions (small positions only) -

Long the 2011 February $60 calls (NTAP1119B60) Entry @ $2.50

Entry on January 12th at $59.04
Earnings Date 02/16/11 (unconfirmed)
Average Daily Volume = 3.8 million
Listed on January 11th, 2010


QUALCOMM Inc. - QCOM - close: 53.03 change: +0.99

Stop Loss: 48.75
Target(s): 54.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
01/18 update: Positive analyst comments on QCOM helped this stock outperform today. Shares broke out higher from its recent sideways consolidation and closed with a +1.9% gain. We may want to reconsider our entry point strategy but I'm not quite ready to chase it yet. Currently our plan is to buy calls on a dip at $50.25. We might want to move that trigger higher toward $51.25 instead. At the same time we may want to drop QCOM and look elsewhere since earnings are less than three weeks away and we normally want to avoid holding over an earnings report.

Trigger @ 50.25

- Suggested Positions -

Buy the 2011 February $52.50 calls (QCOM1119B52.5) current ask $1.65

Entry on January xxth at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 12.1 million
Listed on January 8th, 2010


Research In Motion - RIMM - close: 65.22 change: +0.45

Stop Loss: 59.90
Target(s): 64.75, 67.50
Current Option Gain/Loss: +65.9%, and +55.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/18 update: RIMM spiked higher this morning and hit $66.48 before trimming its gains. Shares still look overbought and due for some profit taking. I am not suggesting new positions at this time. Our final target remains $67.50.

- Suggested Positions -

Long the 2011 February $62.50 calls (RIMM1119B62.5) Entry @ $2.47

- or -

Long the 2011 March $65.00 calls (RIMM1119C65) Entry @ $2.35

01/13: New stop @ 59.90
01/13: 1st Target Hit @ 64.75. Feb. call @ $4.00 (+61.9%) Mar. call @ $3.75 (+59.5%)
01/12: New stop loss @ 58.45

Entry on January 6th at $61.00
Earnings Date 03/31/11 (unconfirmed)
Average Daily Volume = 9.9 million
Listed on January 5th, 2010


SPX Corp. - SPW - close: 75.82 change: +1.65

Stop Loss: 71.75
Target(s): 77.40, 79.90
Current Option Gain/Loss: +25.0%
Time Frame: 4 to 6 weeks
New Positions: See below

Comments:
01/18 update: SPW was looking lively today with a +2.2% gain and a rally past the $75.00 level. I am raising our stop loss to $71.75 since the $72.00-72.50 zone should be new support. SPW is holding an analyst day tomorrow. Headlines from this meeting could fuel movement in the stock price. I am not suggesting new positions at this time. Our upside targets are $77.40 and $79.90.

- Suggested Positions -

Long the 2011 February 75.00 calls (SPW1119B75) Entry @ $2.16

01/18: New stop loss @ 71.75

Entry on January 11th at $73.49
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 396 thousand
Listed on January 10th, 2010


Stanley Black & Decker, Inc. - SWK - close: 68.10 change: -0.05

Stop Loss: 64.75
Target(s): 69.90, 72.45
Current Option Gain/Loss: -92.8%, and -24.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/18 update: We could be in trouble with our January calls. SWK can't seem to break free of the gravitational pull from the $68.00 level. Shares might just hover here until after January option expiration and we only have three trading days left. I am not suggesting new positions at this time. We may want to consider an early exit in the January calls if they ever reach 35 cents again. Our plan was to keep our position size small to limit risk.

- Suggested Positions -

Long the 2011 January $70 calls (SWK1122A70) Entry @ $0.70

- or -


01/15: Consider selling the January calls early @ 35 cents or more
01/06: New stop loss @ 64.75

Entry on January 4th at $68.15
Earnings Date 01/27/11 (confirmed)
Average Daily Volume = 1.6 million
Listed on January xxth, 2010


Wynn Resorts Ltd. - WYNN - close: 118.82 change: +2.10

Stop Loss: 116.95
Target(s): 124.75, 128.00
Current Option Gain/Loss: - 25.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/18 update: Uh-oh! WYNN broke out over $120 this morning and then reversed lower. Shares opened at $120.50 and hit $121.74 only to suddenly reverse and close lower. Shares still eked out a gain for the session but the action was bearish. We had a trigger to buy calls at $120.25 so the trade was opened first thing this morning. I am not suggesting new positions at this time. Wait for a move back above $120.50.

Our plan was to keep our positions very small because this is an aggressive, higher-risk trade. Our first target is $124.75.

(Very Small Positions) - Suggested Positions -

Long the 2011 February $125.00 calls (WYNN1119B125) Entry @ $3.24

01/18: Play triggered on gap open higher at $120.50

Chart:

Entry on January 18th at $120.50
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on January 15th, 2010


CLOSED BULLISH PLAYS

Boeing Co. - BA - close: 72.48 change: +2.40

Stop Loss: 65.90
Target(s): 69.00, 71.85
Current Option Gain/Loss: +167.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/18 update: Target achieved. BA delivered a strong session with a +3.4% gain. The stock is moving on news that BA expects to deliver its first 787 plane in the third quarter of 2011. The stock hit an intraday high of $72.57. Our final target to exit was $71.85. Our option was trading at $2.75 (+276%) and closed with a bid at $3.50.

- Suggested Positions - (small positions only!)

Long the 2011 February $70.00 calls (BA1119B70) Entry @ $0.73

01/18: Target hit. Option @ $2.75 (+276%).
01/15: final target adjusted to $71.85
01/12 New stop loss @ 65.90
01/08: Exit the rest of our January calls @ $2.35 (+305%)
01/06: 1st Target Hit @ 69.00. Jan call @ $2.15 (+270%). Feb. call @ $1.80 (+146%)
01/06: New stop loss @ 64.90

Chart:

Entry on January 3rd at $66.15
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 5.3 million
Listed on December 25th, 2010


CenturyLink, Inc. - CTL - close: 43.94 change: -0.33

Stop Loss: 43.75
Target(s): 44.90, 48.00
Current Option Gain/Loss: - 75.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: CTL produced an ugly end to what had been a very exciting trade. At one point our January $45.00 calls were up +800%. Now with today's dip to $43.55, we've been stopped out at $43.75 and the option ended up worthless.

Current Position:
Long the 2011 January $45.00 calls (CTL1122A45) Entry @ 0.20, exit @ 0.00 (-100%)

01/18: Stopped out at $43.75. option @ $0.00 (-100%)
12/21: Adjusted final target to $48.00
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

Chart:

Entry on November 29th at $42.55
Earnings Date 02/22/11
Average Daily Volume = 3.0 million
Listed on November 27th, 2010


Express Scripts - ESRX - close: 58.74 change: +1.15

Stop Loss: 54.75
Target(s): 53.95, 58.50
Current Option Gain/Loss: +140.4% and +53.1%
Time Frame: 5 to 6 weeks
New Positions: see below

Comments:
01/18 update: Target achieved. The rally in ESRX continued and shares surged to an intraday high of $58.77. Our target was hit at $58.50. Our February call was at $3.95 (+77.9%).

Second Position (small position):

Long the 2011 February $55.00 calls (ESRX1119B55) current ask $2.22

01/18: Target hit @ 58.50. Feb. call @ $3.95 (+77.9%)
01/15: New stop loss @ 54.75
01/14: Exit the January calls at the close. Exit @ $5.05 (+140%)
01/13: Plan on exiting the January calls tomorrow before the close.
01/06: New stop loss @ 53.75
12/25: new stop loss @ 51.49
12/20: Suggested new positions with Feb. 55 calls.
12/18: Adjusted final exit target to $58.50
12/16: New stop loss @ 51.25
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%)

Chart:

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


Goldman Sachs - GS - close: 174.68 change: -0.32

Stop Loss: 167.75
Target(s): 171.00, 179.50
Current Option Gain/Loss: +105.0% and +50.8%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/18 update: It was a disappointing end to our GS play. Our plan was to exit on Tuesday to avoid holding over the company's earnings due out tomorrow morning. Shares started this day off weak but recovered to close almost unchanged.

- Suggested Positions (only small positions so far) -

2011 January $170 calls (GS1122A170) Entry @ $2.75, exit @ $5.65 (+105%)

- or -

2011 April $175 calls (GS1116D175) Entry @ $5.27, exit @ $7.95 (+50.8%)

01/18: Closed ahead of earnings.
01/13: New stop loss @ 167.75, plan on exiting Jan. 18th
01/03: New stop loss @ 165.75
12/28: 1st Target Hit @ 171.00, Jan. call @ $4.75 (+72.7%), April call @ $7.35 (+39.4%)
12/22: New stop loss @ 162.95
12/17: GS opened at $163.92
12/16: Adjusted Entry - initiate small positions now (@ Friday's open)

Chart:

Entry on December 17th at $163.92
Earnings Date 01/19/11 (confirmed)
Average Daily Volume = 7.2 million
Listed on December 2nd, 2010


Cimarex Energy Co. - XEC - close: 99.38 change: +2.10

Stop Loss: 91.80
Target(s): 94.25, 99.50
Current Option Gain/Loss: +174.2%, and +87.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/18 update: That's close enough for me! XEC continues to rally and shares added another +2.1%. The stock closed at its high for the day at $99.38. Now normally that's bullish for the next trading session (closing at the high) but with our target to exit at $99.50 I'm suggesting we go ahead and exit now. I would not be surprised to see XEC gap open higher tomorrow near the $100.00 mark. Keep in mind the $100.00 level potential resistance. Our plan was to keep our position size small to limit our risk.

- Current Positions -

2011 February $95 calls (XEC1119B95) Entry @ $1.75, exit @ $6.20 (+254.2%)

- or -

2011 March $95 calls (XEC1119C95) Entry @ $3.10, exit @ $7.00 (+125.8%)

01/18; Exit early. Feb. call @ 6.20 (+254%), March call @ 7.00 (+125%)
01/15: New stop loss @ 91.80
01/13: New stop loss @ 89.90
01/12: 1st Target Hit @ 94.25. Feb call @ $3.18 (+81.7%) Mar. call @ $4.20 (+35.4%)

Chart:

Entry on January 10th at $90.49
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume = 907 thousand
Listed on December 1st, 2010