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Call Updates

Cardinal Health - CAH - close: 64.06 chg: -0.11 stop: 61.95

We need to be planning our exits here in CAH. The company is due to report earnings on Wednesday, October 26th before the market's opening bell. We'd probably exit on any strength on Monday and worse case we'll close the play on Tuesday.

Suggested Options:
We are not suggesting new plays at this time.

Picked on September 25 at $ 61.95
Change since picked: + 2.11
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 2.0 million

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SurModics - SRDX - close: 42.23 chg: +0.74 stop: 39.99 *new*

The relative strength displayed by SRDX on Friday is very encouraging. Unfortunately, we're running low on time. The company is expected to report earnings on Wednesday, October 26th after the market's close. Just to be safe we're going to plan on exiting Tuesday afternoon at the close instead of Wednesday afternoon. We are not suggesting new plays. We are raising our stop loss to $39.99.

Suggested Options:
Time is running low. We are not suggesting new plays.

Picked on October 18 at $ 40.95
Change since picked: + 1.28
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 249 thousand

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Target Corp - TGT - close: 54.64 change: -1.12 stop: 52.49*new*

There are no surprises here. On Thursday we said that the stock appeared to have produced a short-term top and we would expect TGT to trade lower on Friday. The only bad news here is that TGT traded a bit lower than we expected and fell below what could have been round-number support near $55.00, bolstered by its simple 100-dma. Compounding the problem is that RLX retail index, which has failed to breakout over resistance at its 200-dma. Oh, and let's not forget about worries over rising inflation, high gasoline prices and rising heating bills. Yes, this is a technical play on TGT and not based on any rosy fundamental outlooks. Watch for a bounce from the $54.00 level and/or its simple 50-dma (53.70) before considering new positions. We are going to raise our stop loss to $52.49.

Suggested Options:
We are not suggesting new positions at this time but if TGT does bounce then we'd look to the November calls. Remember, we plan to exit ahead of TGT's November 10th earnings report.

Picked on October 19 at $ 54.01
Change since picked: + 0.63
Earnings Date 11/10/05 (unconfirmed)
Average Daily Volume = 3.8 million
 

Put Updates

Teleflex Inc. - TFX - close: 65.49 chg: +0.52 stop: 68.01*new*

Time is running out for our play on TFX. The company is due to report earnings after the closing bell on Wednesday, October 26th. That means we'll want to exit on Tuesday afternoon at the close. More aggressive players might consider holding positions until Wednesday afternoon. However, keep in mind that TFX has spent the last three days trying to breakdown under support at the $65.00 level and its 100-dma. Thus far support has held. With the stock at support and time running low we are not suggesting new positions. We are adjusting our stop loss to $68.01. More conservative traders may want to put their stop just above the 10-dma near 66.65. We would not hesitate to exit on any dip toward $63.50, which is the top of its July gap higher.

Suggested Options:
We are not suggesting new plays in TFX.

Picked on October 13 at $ 66.49
Change since picked: - 1.00
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 174 thousand
 

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)

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AmerisourceBergen - ABC - cls: 75.06 chg: -0.30 stop: n/a

Share of ABC continue to vacillate around the $75.00 mark, which offers us another opportunity to launch new strangle positions. The stock is testing support at $75.00 and its simple 50-dma, which is also the bottom of its rising channel. The stock is throwing off mixed signals. ABC spent three weeks trying to breakout over the $79 level and failed. Its weekly chart has produced some technical sell signals. Meanwhile its Point & Figure chart is very bullish with a triple-digit price target. We're choosing to use a strangle to capture any significant moves from this pivotal level near $75.00. ABC is expected to report earnings on November 3rd and we will hold over the report.

Suggested Options:
This is a strangle play which requires the trader to buy both an out-of-the-money (OTM) call and an OTM put.

BUY CALL NOV 80.00 ABC-KP OI=643 current ask $0.90
-and-
BUY PUT NOV 70.00 ABC-WN OI=953 current ask $1.05

This would put our total cost around $1.95. Try not to pay more than $2.25. We plan to exit if either option trades at $4.00.

Picked on October 16 at $ 74.81
Change since picked: + 0.25
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 900 thousand

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Genentech - DNA - close: 85.04 chg: +0.21 stop: n/a

Shares of DNA continue to consolidate in a very narrow range. This looks like an attractive entry point to initiate new strangle positions. We are reposting our play description from Thursday night. However, we have corrected a typo in the cost of the option prices and our price target.

The BTK biotech index has been producing a lot of volatility lately. In the last four weeks the BTK index has produced both a bullish buy signal and a bearish sell signal and both were quickly reversed. This state of confusion has left shares of DNA narrowing into a neutral pattern. You could argue DNA is bearish given the breakdown under the $90 level and its 50-dma. You could argue bullish given the short-term double-bottom from support near $80. We're going to suggest a strangle to capture the next move in the stock. This way we don't care what direction it goes as long as the move is significant!

Suggested Options:
We are going to suggest a strangle using December options although one could certainly launch a strangle using November strikes. We like the Decembers because it gives us more time. Investors using a strangle need to buy both an OTM call and an OTM put.

BUY CALL DEC 95.00 DWN-LS OI=6949 current ask $1.15
-and-
BUY PUT DEC 75.00 DWN-XO OI=3630 current ask $1.10

This should put our total investment around $2.25. Try not to pay more than $2.50.

*We would not initiate a new strangle position if DNA gaps open tomorrow outside the $84.50-85.50 range. We plan to exit if either option trades into the $4.50-5.00 range (100% profit).

If you want to try November strikes we would consider the November $90 call and the November $80 put.

Picked on October 20 at $ 84.83
Change since picked: + 0.21
Earnings Date 10/10/05 (confirmed)
Average Daily Volume = 3.9 million

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eBay Inc. - EBAY - close: 39.29 chg: +0.14 stop: n/a

EBAY produced a bit of an oversold bounce on Friday and remains inside its $39-42 trading range. We are not suggesting new strangle positions at this time but readers might want to consider it if EBAY trades close to the $40.00 level again (within 25-cents). Our goal is to double our money so we'll plan on selling if either option trades in the $2.00-2.30 range. We are now in a wait and see mode.

Suggested Options:
We are not suggesting new positions at this time. The options we are using in our strangle are the November $45 call and the November $35 put.

Picked on October 18 at $ 40.42
Change since picked: - 1.15
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 18.3 million

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E*trade Financial - ET - close: 17.88 chg: +0.58 stop: n/a

Shares of ET soared to a new all-time high on Friday with a 3.3% gain on above average volume. We don't see any catalyst for the strength other than follow through on its recent earnings report (which is sort of what we expected). We are not suggesting new plays at this time.

Suggested Options:
We are not suggesting new plays. Our strangle involves the November $17 call and the November $15 put. If either option trades into the $1.60-2.00 range we'll exit. The call is getting close currently at $1.15bid/$1.25ask.

Picked on October 16 at $ 16.28
Change since picked: + 1.60
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 3.4 million

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General Dynamics - GD - cls: 116.54 chg: -1.44 stop: n/a

Thursday's bearish reversal in shares of GD have been followed by a breakdown through the bottom of GD's trading range and technical support at its 50-dma. We are no longer suggesting new strangle positions.

Suggested Options:
We are not suggesting new positions. Our strangle involves the November $125 call and the November $115 put. We plan to sell if either option rises to $4.00 or more.

Picked on October 09 at $119.59
Change since picked: - 3.05
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 713 thousand

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Harman Intl - HAR - cls: 102.04 chg: -3.21 stop: n/a

HAR continued to sell-off on Friday with a three-percent loss. We are not suggesting new plays at this time but if shares fall back toward the $100.00 region traders might want to consider new strangles. The worst case scenario here would be to see HAR churn sideways over the next few weeks without any clear direction.

Suggested Options:
We are not suggesting new positions. Our strangle involves the November $110 call and the November $90 put. We plan to exit if either option rises to $6.00 or more.

Picked on October 18 at $100.80
Change since picked: + 1.24
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 739 thousand

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ITT Industries - ITT - close: 110.50 chg: +0.54 stop: n/a

We see no changes from our Thursday play description. ITT continues to trade in a narrow range around the $110 level and its 50-dma. This looks like another entry point to launch a strangle position. We're reposting our play description here:

ITT looks like another attractive strangle candidate. The stock's upward momentum has stalled with a bearish double-top pattern near $115.00. Yet even though the stock has broken below its five-month bullish trendline of support there has not been a lot of bearish follow through. Instead shares have been consolidating sideways the last few days. We're going to suggest a strangle and expect the October 27th earnings report (before the market open) to be the catalyst for ITT's next big move.

Suggested Options:
We are going to suggest the November strikes although more conservative traders could try January strikes.

BUY CALL NOV $115.00 ITT-KC OI=308 current ask $1.35
-and-
BUY PUT NOV $105.00 ITT-WA OI=514 current ask $1.30

This puts our total investment around $2.65. Try not to pay more than $3.00. We would not initiate new positions if ITT trades outside the $109-111 range. We considered a $120c/100p strangle but there aren't any $100 puts available for November. We'll plan to exit/sell if either option trades in the $4.50-5.00 range.

Picked on October 20 at $109.96
Change since picked: + 0.54
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 532 thousand

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Kos Pharma - KOSP - close: 59.03 chg: -0.77 stop: n/a

Traders had about an hour on Friday morning to initiate new strangle positions before shares of KOSP sank lower. We are not suggesting new plays at this time but if KOSP manages to bounce back to the $60.00 level readers may want to consider a new strangle. The company is due to report earnings on November 3rd. We do plan to hold over the report.

Suggested Options:
We are not suggesting new plays at this time. The options in our strangle are the November $65 call and the November $55 put. We'll plan to sell if either option rises to $5.00 or more.

Picked on October 20 at $ 59.80
Change since picked: - 0.77
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 460 thousand

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Legg Mason - LM - cls: 105.60 chg: +2.06 stop: n/a

LM continues to bounce higher and is now in the middle of its $100-110 trading range. We expect the company's earnings report on the morning of October 25th to produce the added volatility we need to see our play become successful. We are not suggesting new positions at this time.

Suggested Options:
We are not suggesting new plays at this time. The options in our strangle are the November $110 call and the November $90 put. We are adjusting our price target so that we'll exit/sell if either option rises to $5.00 or more (100% profit).

Picked on October 12 at $102.59
Change since picked: + 3.01
Earnings Date 10/24/05 (unconfirmed)
Average Daily Volume = 966 thousand

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O'Reilly Auto. - ORLY - close: 26.80 chg: +0.15 stop: n/a

Shares of ORLY continue to churn sideways just south of its simple and exponential 200-dma's. The company is expected to report earnings on Tuesday, October 25th. We expect the company's earnings report to produce the needed volatility to make our play successful. We are not suggesting new strangle positions at this time however if ORLY were to trade back to the $27.50 region (27.30-27.70) before its earnings report we might consider a new strangle.

Suggested Options:
We are not suggesting new positions at this time. The options in our strangle are the November $30 call and the November $25 put. We are adjusting our price target to $1.75-2.00. If either option rises to $1.75 or more we'll exit.

Picked on October 09 at $ 28.23
Change since picked: - 1.43
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 513 thousand

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Verifone Holdings - PAY - cls: 21.21 chg: +0.19 stop: n/a

Shares of PAY are testing overhead resistance at its exponential 200-dma. More importantly the stock has moved away from our entry point to launch any strangle positions so we are not suggesting new plays at this time.

Suggested Options:
We are not suggesting new plays at this time. The options in our strangle are the January $22.50 calls and the January $17.50 puts. We plan to exit if either option rises to $4.50 or more. We also suggested an alternative strangle with the November $22.50 call and the November $17.50 put. We would exit the Novembers if either option rises to $2.00 or more.

Picked on October 12 at $ 19.98
Change since picked: + 1.23
Earnings Date 11/18/05 (unconfirmed)
Average Daily Volume = 259 thousand

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P.F.Chang's - PFCB - close: 50.94 chg: +0.95 stop: n/a

PFCB is a new strangle from the Thursday night newsletter. We do not see any changes from our original play description. However, we would not suggesting new positions unless the stock traded back toward the $50.00 level (say 50.40-49.60). Here's a reprint of the Thursday night play:

Shares of PFCB have been churning sideways in a $4.00 range (48-52) since the company announced a mixed same-store sales picture back in early October. Currently the stock is trading right in the middle of its range and we expect that the earnings report next week (Wednesday, October 26th before the market open) will be the catalyst to push PFCB out of this trading range.

Suggested Options:
We are not suggesting new plays at this time. The options in our strangle are the November $55 calls and the November $45 puts. Try and keep your investment to less than $1.75. We plan to exit if either option rises to $2.50 or more.

Picked on October 20 at $ 49.99
Change since picked: + 0.95
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 912 thousand
 

Dropped Calls

Biosite Inc. - BSTE - close: 68.42 chg: +0.73 stop: 61.49

BSTE continues to show great relative strength by adding more than one-percent on Friday despite a lackluster performance in the biotech sector. The stock hit our primary target of $67.50 a few days ago and is close to hitting our secondary target near $69.50. However, we are choosing to exit early. The company is due to report earnings on Tuesday, October 25th and we do not want to hold over the report. We'll exit here before investors decided to do any profit taking!

Picked on October 13 at $ 63.39
Change since picked: + 5.03
Earnings Date 10/25/05 (unconfirmed)
Average Daily Volume = 261 thousand

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Pre Paid Legal - PPD - close: 41.52 chg: +1.05 stop: 39.75

Time is almost up for our PPD play and we're choosing to exit a little early. The company is expected to report earnings on Monday, October 24th after the market's closing bell. The only problem is that this earnings date is not confirmed. We're exiting early because we'd rather be cautious than unexpectedly hold over a report and have the stock move against us.

Picked on October 10 at $ 40.10
Change since picked: + 1.42
Earnings Date 10/24/05 (unconfirmed)
Average Daily Volume = 72 thousand
 

Dropped Puts

None
 

Dropped Strangles

Google Inc. - GOOG - close: 339.90 chg: +36.70 stop: n/a

Target achieved and surpassed. Google was the story of the day on Friday. Reaction to the company's earnings report was impressive. The stock gapped open at $345.80 and closed at $339.90. It was a big day. The calls in our strangles have surpassed our price targets. The November $320 call hit a high of $30.50 and is trading at 24.90ask/25.00bid. The December $330 call hit a high of $28.10 and is trading at $23.10ask/23.10bid, which sort of looks like a typo not having any spread. Whichever strangle you chose we hope you locked in your profits. Our targets for both strangles were to sell if either option hit the $18.00-20.00 range.

Picked on October 16 at $296.14
Change since picked: +43.76
Earnings Date 10/20/05 (confirmed)
Average Daily Volume = 8.1 million
 

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