Editor's Note:

We have been waiting for a pull back and today's decline hit a couple of triggers. CAT and IYF, both call plays, have been opened. I have adjusted the triggers on CLF and NKE. Shares of ESS plunged hitting both our trigger and stop loss in the same move.

Market pundits were in an uproar this afternoon about the widespread decline today where stocks, bonds, and metal (gold, silver) all surged lower in the last couple of hours of trading. Everyone was talking about buying puts to protect their stock positions. This is clearly a bearish reversal for many securities. The question is, "Will there be any follow through?" Is this just a temporary dip like the ones we've seen over the past twelve weeks? Or is this the start of something more?

If this is another temporary dip then we want to look for entry points as stocks and the market nears clear support levels. If this is a real correction then the market could see a -5% decline (or more) and we'll see most of our bullish candidates get stopped out. Readers will want to keep positions small for the time being.

-James

Current Portfolio:


CALL Play Updates

Caterpillar - CAT - close: 81.91 change: -1.21

Stop Loss: 79.40
Target(s): 84.85, 89.50
Current Option Gain/Loss: + 6.0%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11/9: We've been hoping for a pull back and the market finally provided one today. CAT dipped to $81.41 intraday. Our trigger to buy calls was hit at $81.75. If you missed the entry point you could buy calls now or wait for a pull back closer to the $80.00 level.

Earlier Comments
Our first target is $84.85. We want to exit the majority of our position here. We'll set a secondary target at $89.50 but again I warn you the $85 level should be tough resistance. FYI: The P&F chart is bullish with a $118 target.

Current Position: Long the December $85 calls (symbol: CAT1018L85)
Entry @ $1.40

Annotated Chart:

Entry on November 9th at $ 81.75
Earnings Date 01/27/11
Average Daily Volume = 7.7 million
Listed on November 6th, 2010


Cliffs Natural Resources - CLF - close: 68.83 change: -2.06

Stop Loss: 64.75
Target(s): 71.50, 74.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
11/9: Commodity-related stocks were not immune to the sell-off. Actually strength in the U.S. dollar may have accelerated the pull back in CLF, which lost -2.9% on Tuesday. The low today was $68.11 - not enough to hit our trigger. Today's session certainly looks like a short-term bearish reversal so I am moving our trigger from $68.00 to $67.00 and we'll put the stop loss at $64.75.

Earlier Comments
We'll use a stop loss at $64.75. Our upside targets are $72.00 and $74.75.

Trigger to buy calls @ $67.00 <-- new trigger

Suggested Position: Buy the 2010 December $70.00 CALL

Entry on November XX
Earnings Date 02/17/11
Average Daily Volume = 4.3 million
Listed on November 1, 2010


Costco Wholesale - COST - close: 64.22 change: -0.59

Stop Loss: 62.90
Target(s): 69.00
Current Option Gain/Loss: -14.6%
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Comments:
11/9: The correction continues following Friday's failed rally at $66. Shares of COST dipped toward short-term support near $64.00 and its 30-dma this afternoon. If the market continues to sell-off sharply then we'll probably get stopped out soon but if traders buy the dip then today's move in COST looks like another bullish entry point. Remember, we want to keep our position size small to limit our risk.

Current Position: December $65.00 calls (symbol: COST1018L65)
Option Entry @ $1.50

Entry on November 8th at $64.50
Earnings Date 12/09/10
Average Daily Volume = 3.4 million
Listed on November 6th, 2010


Humana Inc. - HUM - close: 59.12 change: -0.50

Stop Loss: 51.75
Target(s): 59.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11/9: HUM held up relatively well only slipping -0.8%. Shares still look poised to correct lower. There is no change from my previous comments.

Earlier Comments
We want to wait for a dip and use a trigger at $55.25 to buy calls. Aggressive traders may want to consider puts while we wait since we're expecting such a big correction. If HUM hits our bullish trigger at $55.25 we'll use a stop loss at $51.75.

Suggested Position:

Trigger to buy calls at $55.25

BUY the 2011 January $55 calls.

Entry on November xxth at $ xx.xx
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010


iShares DJ Financial ETF - IYF - close 54.89 change -1.08

Stop Loss: 53.40
Target(s): 57.50, 59.75
Current Option Gain/Loss: -5%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11/9: Financials were some of the worst performers today with heavyweights like BAC down -2.6% and WFC down -3.1%. The IYF slipped -1.9% and hit $54.63 intraday. Our trigger to buy calls was hit at $55.00. If you're still looking for an entry point readers may want to wait for a dip closer to $54.00.

Earlier Comments
Our first target is $57.50. Our second, longer-term target is $59.75.

Current Position: Long the December $55.00 CALLS, entry @ $2.00

Annotated Chart:

Entry on November 9th @ 55.00
Earnings Date N/A (unconfirmed)
Average Daily Volume: 1.0 million
Listed on November 4, 2010


Nike Inc. - NKE - close: 83.20 change: -0.41

Stop Loss: 79.90
Target(s): 87.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
11/9: Shares of NKE held up very well during today's market-wide decline. I still think shares will dip toward $82.00 and I'm moving our trigger to buy calls from $82.50 to $82.00.

Earlier Comments
Stop loss at $79.90. Our first target is $87.25. FYI: The Point & Figure chart is very bullish with a long-term target of $115.

Trigger to buy calls @ 82.00 <-- New Trigger

Suggested Position: Buy the December $85.00 CALLS (symbol:NKE1018L85)

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


VimpelCom Ltd - VIP - close 15.89 change +0.17

Stop Loss: 14.80
Target(s): 16.75, 17.75
Current Option Gain/Loss: - 4.7%
Time Frame: 6 to 8 weeks
New Positions: Yes

Comments:
11/9: It was another rocky session for VIP. Shares rallied toward Friday's highs but didn't quite make it. The stock then rolled over with the rest of the market. Wait for a dip into the $15.50-15.25 zone before considering new bullish positions. FYI: VIP is due to report earnings around Nov. 24th.

Current Position: December $15.00 CALLS, Entry @ $1.05

Entry on November 8, 2010 @ 15.60
Earnings Date 11/24/2010 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on November 3, 2010


PUT Play Updates

Millicom Intl. - MICC - close: 93.16 change: +0.10

Stop Loss: 98.25
Target(s): 92.50, 90.25
Current Option Gain/Loss: + 6.1%
Time Frame: 3 to 4 weeks
New Positions: No

Comments:
11/9: MICC is still hugging technical support at its rising 100-dma. There is no change from yesterday's comments. I am not suggesting new positions at this time. We still have our final target at $90.25.

Current Position: Long December 2010 $90 puts (MICC1018X90)
Entry @ $2.45

11/08 Target hit @ 92.50, option @ 2.85 (+16.3%)

Entry on November 1, 2010
Earnings Date 02/01/11
Average Daily Volume = 490 thousand
Listed on October 30th, 2010


CLOSED BULLISH PLAYS

Essex Property Trust - ESS - close: 110.03 change: -5.21

Stop Loss: 111.80
Target(s): 119.50, 124.50
Current Option Gain/Loss: -22.2%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11/9: Our new candidate in ESS didn't last long. We were expecting a dip back toward $114.00, maybe $112.00. Instead shares plummeted lower through out the session for a -4.5% decline. There was no let up in the selling and I couldn't find any specific catalyst behind the market's widespread pull back. Shares of ESS hit our trigger at $114.00 and quickly hit our stop loss at $111.80 closing the play. The stock has now broken its trendline of higher lows and broken below its 50-dma. We wanted to keep our position size small to limit risk.

Opened & Closed Position:
Triggered @ $114.00 - Closed at $111.80

2011 January $120 calls (symbol: ESS1122A120):
Estimated entry @ $2.25, Estimated exit @ 1.75 (-22.2%)

Annotated Chart:

Entry on November 9th at $114.00
Earnings Date 02/02/11
Average Daily Volume = 209 thousand
Listed on November 8th, 2010