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Call Updates

AutoZone - AZO - close: 86.07 chg: -0.67 stop: 84.95

We didn't see the continuation of the bounce we expected but traders where ready to buy the dip to AZO's simple 10-dma today. The stock was moving higher into the closing bell so this looks like a new bullish entry point. We are targeting a move into the $89.90-90.00 range.

Picked on November 13 at $ 86.74
Change since picked: - 0.67
Earnings Date 12/08/05 (unconfirmed)
Average Daily Volume = 1.1 million

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Intl. Bus. Mach. - IBM - cls: 84.36 chg: -0.19 stop: 81.95

IBM tried to breakout over the $85.00 level this morning but the market malaise seemed to hold it back. The stock spent the session churning between $84 and $85. We remain optimistic but our strategy calls for a trigger to buy calls at $85.25. If we are triggered our immediate target will be the $89.90-90.00 range.

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/16/06 (unconfirmed)
Average Daily Volume = million

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Intel Corp. - NTC - close: 25.38 chg: +0.25 stop: 23.45

INTC continues to display relative strength and out performed the NASDAQ composite today. Shares remain under short-term resistance at the 100-dma near the $25.50 level. If you're looking for a new bullish entry point we'd watch the simple 10-dma. Our year-end target is the $26.00-26.50 range.

Picked on November 06 at $ 23.99
Change since picked: + 1.39
Earnings Date 10/18/05 (confirmed)
Average Daily Volume = 51.6 million

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Legg Mason - LM - cls: 117.85 change: +1.69 stop: 109.95*new*

The broker-dealers continue to show leadership. LM added another 1.45% and temporarily broke through resistance at the $118 level today. Our target is the $119-120 range but traders may want to seriously consider exiting right here for a profit! We are raising our stop loss to $109.95.

Picked on November 02 at $111.69
Change since picked: + 6.16
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 904 thousand

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NovAtel Inc. - NGPS - close: 28.87 chg: -0.98 stop: 27.75

NGPS pulled back this morning and spent the session trading between short-term support at $28.00 and resistance at $30. Our strategy is to buy calls on a breakout above the $30.00 level. Our trigger is at $30.45 (over Friday's high). If triggered we'll target a move into the $35.00-36.00 range.

Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 292 thousand

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Rockwell Autom. - ROK - cls: 56.62 chg: +0.31 stop: 53.49

ROK continues to consolidate sideways but the intraday chart shows the slow bullish creep higher. It looks like ROK is poised to breakout over the $57.00 level soon. We are only targeting a move into the $61-62 range.

Picked on November 03 at $ 55.90
Change since picked: + 0.72
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 804 thousand
 

Put Updates

Sears Holding - SHLD - cls: 113.52 chg: -1.28 stop: 119.01

This morning rival Wal-Mart (WMT) issued its Q3 earnings report, which was largely inline with Wall Street's estimates and there was no change with the company's guidance. This news seemed to weigh on shares of SHLD, which spiked lower this morning and hit $112.24. Our trigger to buy puts in SHLD was at $112.99, which is under the bottom of its eight-week trading range and support in the $113.50-114.00 region. The play is now open and we're targeting a decline into the $100.50-100.00 range. However, keep in mind that SHLD is short-term oversold and due for a bounce. Such a bounce could prove to be an attractive entry point for new put positions but you'll want to watch for signs that the rally is fading. We'll be sure to point out new entry points in the newsletter.

Picked on November 14 at $112.99
Change since picked: + 0.53
Earnings Date 12/07/05 (unconfirmed)
Average Daily Volume = 3.2 million
 

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: 76.74 chg: -0.24 stop: n/a

Today's lifeless market action did absolutely nothing to help our play in ABC, which has been fatally wounded by the stock's narrow sideways consolidation. ABC continued to churn sideways today. Over the weekend we made a mistake in our ABC update. The Sunday update said that the November $80 calls were trading at $1.10bid/$1.25 ask. This is incorrect. The Nov. $80 calls are actually trading at $0.05/$0.15. What we listed was the value for the December $80 calls by accident. Our estimated cost on the November strangle was $2.10. We would suggest exiting for almost any amount if ABC were to make a move before Friday's expiration. The December strangle still has five weeks left with an estimated cost of $2.80 using the December $80 calls (ABC-LP) and the December $70 puts (ABC-XN). Our target for the December strangle is $5.00.

Picked on October 16 at $ 74.81
Change since picked: + 1.93
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 900 thousand

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Amer. Eagle Out. - AEOS - cls: 24.35 chg: -1.12 stop: n/a

AEOS hit some volatility today. The stock gapped down at the open after WMT's lackluster earnings report and a broker downgrade to "hold" for AEOS. There was a bounce back to the $25.00 level offering us a great entry point to launch a strangle before tomorrow's earnings report for the company. Wall Street expects AEOS to report earnings of $0.46 per share. We are no longer suggesting new strangle positions. The current strangle has an estimated cost of $2.35 with the January $27.50 calls (AQU-AY) and the January $22.50 puts (AQU-MX). We are targeting a rise to $4.70.

Picked on November 13 at $ 25.47
Change since picked: - 1.12
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 3.6 million

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Abercrombie&Fitch - ANF - close: 59.53 chg: -0.14 stop: n/a

ANF continues to consolidate sideways near the $60.00 level as investors wait for the company to report earnings after the closing bell tomorrow. That gives us another day to open strangle positions. Our suggested entry window is the $59.00-61.00 range but the closer to $60.00 the better. We are suggesting the January $65 calls (ANF-AM) and the January $55 puts (ANF-MK). Our estimated cost was $5.15. We're looking for a rise to $8.50.

Picked on November 13 at $ 59.67
Change since picked: - 0.14
Earnings Date 11/15/05 (confirmed)
Average Daily Volume = 2.7 million

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D.R.Horton - DHI - close: 32.41 chg: -0.15 stop: n/a

DHI continues to consolidate sideways as investors wait for the company's earnings report on November 16th. We are suggesting an entry window of $32.00-33.00 but the closer to $32.50 the better. Our strangle strategy involves the January $35 calls (DHI-AG) and the January $30 puts (DHI-MF). Our estimated cost was $3.15. We're aiming for a rise to $6.00.

Picked on November 13 at $ 32.56
Change since picked: - 0.15
Earnings Date 11/16/05 (confirmed)
Average Daily Volume = 3.2 million

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eBay Inc. - EBAY - close: 43.53 chg: -0.36 stop: n/a

Gosh, the news that Dell has added PayPal (owned by EBAY) as a payment option on Dell.com sounds bullish to us. Unfortunately, shares of EBAY were too overbought to rise on the news and hit some profit taking on Monday instead. We have four days left before November options expire. Our estimated cost was about $1.05. The November $35 puts (XBA-WG) are virtually worthless so we would not waste the commission trying to sell them - just let them expire. The November $45 calls (XBA-KI) are currently selling at $0.15bid/$0.20ask. It's up to you, the individual trader, to decide at what price do you try and salvage some capital from this play. We're going to lower our target to $0.50.

Picked on October 18 at $ 40.42
Change since picked: + 3.11
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 18.3 million

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Four Seasons - FS - close: 50.80 chg: +1.00 stop: n/a

FS produced an oversold bounce today. Watch for this bounce to hit potential resistance in the $52 region. We are not suggesting new strangles at this time. The options in our strangle were the January $60 calls (FS-AL) and the January $50 puts (FS-MJ). Our estimated cost was about $2.60. We're aiming for a rise to $5.00 or more.

Picked on November 08 at $ 55.37
Change since picked: - 4.57
Earnings Date 11/10/05 (confirmed)
Average Daily Volume = 319 thousand

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General Dynamics - GD - cls: 115.95 chg: -0.40 stop: n/a

We only have four days left before November options expire. GD need to see a breakdown under support at the 100-dma near the $115.00 level. The options in our strangle are the November $125 calls (GD-KE) and the November $115 puts (GD-WC). Our estimated cost was about $2.00. Currently the Nov. 115 puts are trading at $0.35bid/$0.50ask. A move to the $115 level will certainly help but time decay is going to speed up this week. We're going to adjust our target to $1.00 and try and salvage some trading capital here.

Picked on October 09 at $119.59
Change since picked: - 3.64
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 713 thousand

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Harman Intl - HAR - cls: 100.00 chg: -2.54 stop: n/a

We see no change from our previous updates on HAR. Yes, the stock did breakout from last week's trading range but unless the stock produced a big move in the next couple of days this strangle is going to expire for a loss. The options in our strangle were the November $110 calls (HAR-KB) and the November $90 puts (HAR-WR). Traders should try to salvage what they can if HAR makes any attempt at a breakout either direction.

Picked on October 18 at $100.80
Change since picked: - 0.80
Earnings Date 10/19/05 (confirmed)
Average Daily Volume = 739 thousand

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Hutchinson Tech. - HTCH - cls: 25.17 chg: -0.17 stop: n/a

We see no changes from our weekend update on HTCH. We are not suggesting new strangles at this time. The options in our strangle were the January $30 calls (UTQ-AF) and the January $20 puts (UTQ-MD). Our estimated cost was $1.65. We are adjusting our target from $3.00 to breakeven at $1.65.

Picked on October 26 at $ 24.89
Change since picked: + 0.28
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 666 thousand

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Inamed Corp. - IMDC - close: 74.44 change: -0.29 stop: n/a

We see no changes from our weekend update on IMDC. We are not suggesting new strangles. We have five weeks left before the December options expire. The options in our strangle are the December $75 calls (UZI-LO) and the December $65 puts (UZI-XM)). Our target is for a rise to $5.00 or more.

Picked on October 30 at $ 70.63
Change since picked: + 3.79
Earnings Date 11/01/05 (unconfirmed)
Average Daily Volume = 533 thousand

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Kos Pharma - KOSP - close: 58.28 chg: -0.64 stop: n/a

We are running out of time with our November strangle using the November $65 calls (KQW-KM) and the November $55 puts (KQW-WK). We need to be planning to exit on any spike (probably down) that might breathe new life into the options so we can salvage some trading capital.

Picked on October 20 at $ 59.80
Change since picked: - 1.52
Earnings Date 11/03/05 (confirmed)
Average Daily Volume = 460 thousand

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Lear Corp - LEA - close: 28.42 chg: +0.09 stop: n/a

We see no changes from our weekend update on LEA. We're not suggesting new strangles at this time. The options in our strangle are the January $35 calls (LEA-AG) and the January $25 puts (LEA-ME). We are targeting a rise to $3.20 or more.

Picked on November 06 at $ 30.24
Change since picked: - 1.82
Earnings Date 10/26/05 (confirmed)
Average Daily Volume = 1.8 million

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Loews - LTR - close: 97.06 change: +0.70 close: n/a

LTR continues to show strength and the stock hit another new high today. We're not suggesting new strangle positions in LTR. The options in our strategy are the December $95 calls (LTR-LS) and the December $85 puts (LTR-XQ). Our estimated cost is about $3.05. We'll plan to exit if either option rises to $5.00 or more.

Picked on October 23 at $ 89.94
Change since picked: + 7.12
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 602 thousand

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Microsoft - MSFT - close: 27.35 change: +0.07 stop: n/a

MSFT continues to defy gravity but the rally does look like its getting tired. We are not suggesting new positions here. Our strangle is based on the December $27.50 call (MSQ-LY) and the December $22.50 put (MSQ-XX). Our estimated cost was $0.30 for the entire position. We are aiming for a rise to $0.80-0.90 for either side of the strangle. Currently the December $27.50 calls are already trading at $0.45bid/$0.50ask, which is a 50% rise in value for our position. More conservative traders may want to exit early right here.

Picked on October 25 at $ 25.03
Change since picked: + 2.32
Earnings Date 10/27/05 (confirmed)
Average Daily Volume = 64 million

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O'Reilly Auto. - ORLY - close: 30.60 chg: -0.29 stop: n/a

ORLY hit some profit taking today but traders bought the dip near $30.30 stemming its losses above the simple 10-dma. The stock was rising into the close so ORLY might make another attempt at the $31 level tomorrow. We only have a few days left before November options expire. Our cost for the strangle was about $0.75. Currently the November $30 calls (OQR-KF) are trading at $0.50/0.65. Our current target is $1.25.

Picked on October 09 at $ 28.23
Change since picked: + 2.39
Earnings Date 10/25/05 (confirmed)
Average Daily Volume = 513 thousand

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Verifone Holdings - PAY - cls: 24.30 chg: -0.16 stop: n/a

We see no changes from our weekend update on PAY. We are targeting a rise to $4.50 for our January strangle. Currently the January $22.50 calls (PAY-AX) appear to be the winning side.

Picked on October 12 at $ 19.98
Change since picked: + 4.32
Earnings Date 11/18/05 (unconfirmed)
Average Daily Volume = 259 thousand

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Protein Design Labs - PDLI - cls: 25.49 chg: -0.07 stop: n/a

We see no changes from our weekend update on PDLI. We are not suggesting new positions at this time. The options in our hypothetical strangle are the December $30 calls (PQI-LF) and the December $25 puts (PQI-XE). We'll plan to sell if either side rises to $3.25. We have five weeks left before December options expire.

Picked on October 30 at $ 27.70
Change since picked: - 2.21
Earnings Date 11/01/05 (confirmed)
Average Daily Volume = 1.8 million

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Spectrum Brands - SPC - close: 16.39 change: -1.61 stop: n/a

News that a government investigation into its recent earnings results has sent shares of SPC plummeting almost nine percent today. Volume was very heavy at three times the norm. We are not suggesting new strangle positions. Our estimated cost for this strangle was $1.25. The options in our suggested strangle are the December $22.50 calls (SPC-LX) and the December $17.50 puts (SPC-XW). We are aiming for a rise to $2.50 or more. Currently the Dec. $17.50 puts are trading at $1.55bid/$1.70ask.

Picked on November 08 at $ 20.63
Change since picked: - 4.24
Earnings Date 11/10/05 (confirmed)
Average Daily Volume = 576 thousand
 

Dropped Calls

Phelps Dodge - PD - cls: 124.16 chg: -6.15 stop: 123.69

Wow! Talk about a whipsaw. Friday's breakout looked like it had plenty of bullish signals to back it up. Monday proved us wrong. PD gapped lower to open at $126.50 and then traded down to $123.61 on an intraday basis. The cause of the sudden weakness is unknown. One source suggested the drop in PD was due to weakness in copper prices but a quick check of the copper futures shows the commodity hit another new multi-year high today. Then there is the oddity with PD's price and change for the day. The stock closed at $130.31 on Friday and shares closed at $124.16 today but all the data services we checked show PD's change for the day at a minus 77 cents (-0.77) not the -6.15 we see. We set our stop loss at $123.69 if anyone opened positions this morning on the gap down we've already been stopped out. The question one might ask is whether or not we had our stop too tight or not tight enough. A 10% stop loss rule would have put our stop in the $117 area. If PD bounces from here traders might want to use it as a new bullish entry point but the $130 level will probably be short-term resistance. The simple 50-dma looks like short-term support (currently at 121.88). We're going to close this play at a loss but we'll keep our eyes on PD for another opportunity.

Picked on November 13 at $130.31
Change since picked: - 6.15
Earnings Date 01/26/06 (unconfirmed)
Average Daily Volume = 2.7 million
 

Dropped Puts

None
 

Dropped Strangles

Genentech - DNA - close: 96.50 chg: +1.76 stop: n/a

Target achieved! Shares of DNA ignored weakness in the biotech sector and broke out over resistance at the $95.00 mark to close with a 1.85% gain. This move pushed the call side of our strangle to our target, which was $4.50 or better. The December $95 calls (DWN-LS) hit a high of $4.50 and are currently trading at $4.40bid/$4.50 ask. This represents an 87.5% rise in value from our estimated cost of $2.40 for the strangle. Please note that while we are closing the play at our target this breakout in DNA looks very bullish. There are five weeks left before December options expire and DNA could easily rally to the $100 level in the next few days. More aggressive traders may want to think about keeping their strangle position open.

Picked on October 20 at $ 84.83
Change since picked: +11.67
Earnings Date 10/10/05 (confirmed)
Average Daily Volume = 3.9 million

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Lowes Cos. - LOW - close: 64.89 chg: +2.92 stop: n/a

Target achieved! LOW reported earnings this morning that were better than expected and the stock gapped higher and ran to an intraday high of $66.05 before paring its gains. This big move in the stock price pushed the December $65 calls (LOW-LM) to an intraday high of $2.55. Our target was $2.40 or better. Our estimated cost was $1.20 so an exit at $2.40 would have been a 100% rise in value. There are still five weeks left before December options expire and more aggressive, experienced traders might want to consider holding their position longer to see if LOW continues higher. Bear in mind that gaps, like this morning's, tend to get filled.

Picked on November 09 at $ 60.33
Change since picked: + 4.56
Earnings Date 11/14/05 (confirmed)
Average Daily Volume = 4.3 million
 

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