Editor's Note:

The market experienced a widespread bounce on Thursday but for the most part the rally stalled at overhead resistance. Our bullish play on HUM was triggered while our bearish play on FFIV has been stopped out.

-James

Current Portfolio:


CALL Play Updates

Ansys, Inc. - ANSS - close: 48.47 change: +0.78

Stop Loss: 44.90
Target(s): 49.50,
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
11/18: The market-wide bounce on Thursday lifted ANSS to a +1.6% gain but shares are still inside the sideways consolidation over the past week. There is no change from my prior comments. Currently our plan is to buy calls on a dip at $46.75 but readers may want to wait and watch for a bounce from the $46.00 level before initiating positions instead.

Buy-the-dip trigger @ 46.75

Suggested Position: Buy the 2011 January $50.00 calls (ANSS1018L50)

Entry on November xxth at $ xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 651 thousand
Listed on November 13th, 2010


Caterpillar - CAT - close: 83.11 change: +1.94

Stop Loss: 79.40
Target(s): 84.85, 89.50
Current Option Gain/Loss: +12.1% & +34.1%
Time Frame: 3 to 4 weeks
New Positions: Yes

Comments:
11/18: CAT said October sales came in strong and shares gapped open at $82.50 and closed with a +2.3% gain near the top of its recent trading range. I would probably look for CAT to fill the gap with a dip back toward $81.50 before initiating new bullish positions.

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.

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

Double Down
New Position: Buy the December $85 calls (CAT1018L85), current ask $1.17

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: 67.80 change: +1.39

Stop Loss: 64.75
Target(s): 71.50, 74.75
Current Option Gain/Loss: - 7.4%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11/18: A drop in the dollar helped buoy the commodity-related names. Shares of CLF gapped open at $68.00 and closed with a +2% gain on the session. Readers can buy calls on this bounce but I wouldn't be surprised to see another dip toward $67.00 before CLF moves higher again.

Current Position: Long the 2010 December $70.00 CALL, Entry @ $2.42

Entry on November 12th @ 67.00
Earnings Date 02/17/11
Average Daily Volume = 4.3 million
Listed on November 1, 2010


Costco Wholesale - COST - close: 66.41 change: -0.61

Stop Loss: 62.90
Target(s): 69.00
Current Option Gain/Loss: + 64.0%
Time Frame: 3 to 4 weeks
New Positions: No

Comments:
11/18: The RLX retail index posted a gain but the sector lagged behind the rest of the market thanks to a huge earnings miss from Sears (SHLD). Shares of COST spiked to a new relative high of $67.49 this morning and then reversed. This could be a short-term bearish reversal but it needs to see confirmation first. I would expect COST to find some short-term support near $66.00.

Earlier Comments
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


Express Scripts - ESRX - close: 52.99 change: +1.58

Stop Loss: 49.65
Target(s): 53.95, 57.25
Current Option Gain/Loss: +45.0%, and +25.2
Time Frame: 5 to 6 weeks
New Positions: No, wait for a dip

Comments:
11/18: Our new play in ESRX is off to a strong start. Shares opened at $51.81 and surged toward recent resistance in the $53.00-53.25 zone. If you're looking for a new entry point and did not buy the open I would watch for a pull back toward $52.00. Keep your position size small. My original plan was to buy half a position this morning and the second half on a dip near $50.50. Our first target to take profits is at $53.95. I'm setting a secondary target at $57.25.

EDIT: I originally listed the 2010 Dec $52.50 calls but I published the 2011 Jan $52.50 call symbols. I'm providing data on both.

Current Position: Long the 2010 December $52.50 calls (ESRX1018L52.5) Entry @ $1.22
- or -
Current Position: Long the 2011 January $52.50 calls (ESRX1122A52.5) Entry @ $2.10

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


Humana Inc. - HUM - close: 58.05 change: +0.49

Stop Loss: 51.75
Target(s): 59.75
Current Option Gain/Loss: - 2.6%
Time Frame: 4 to 6 weeks
New Positions: Yes, look for another dip

Comments:
11/18: The good news is that our HUM play is now open. The bad news is that HUM issued a profit warning! The company warned that their 2011 profit forecast would decline as the company makes adjustments for the new healthcare laws and Medicare margins. Management did point out that longer-term the aging U.S. population offers a very favorable environment for HUM.

The stock gapped open lower at $55.05, dipped to $54.57, and almost immediately rebounded thanks to the market-wide rally. On a short-term basis I would not be surprised to see HUM roll over under the $58.00 level. If you missed the entry point this morning I wouldn't panic. HUM will probably see another dip toward $55 or at least its 50-dma again. We had a trigger to buy calls at $55.25 so the gap open at $55.05 immediately opened this trade.

Current Position: Long the 2011 January $55 calls (HUM1122A55) Entry @ $3.80

Annotated Chart:

Entry on November 18th at $55.05
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010


iShares DJ Financial ETF - IYF - close 53.77 change +0.67

Stop Loss: 52.90
Target(s): 57.50, 59.75
Current Option Gain/Loss: -57.5%
Time Frame: 6 to 8 weeks
New Positions: No

Comments:
11/18: Banks saw a decent bounce and the IYF gained +1.2%. This ETF is back above its 50 and 200-dma but it failed to close over $54.00. Aggressive traders could look to buy another dip in the $53.25 region. Otherwise I would suggest waiting for a close over $54.00.

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

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: 82.47 change: +1.08

Stop Loss: 79.90
Target(s): 86.75, 89.50
Current Option Gain/Loss: -43.4%
Time Frame: 4 to 6 weeks
New Positions: Yes

Comments:
11/18: NKE announced a 15% increase in its quarterly dividend to $0.31 a share. Meanwhile the market's strength today helped shares gain +1.3@ and close over potential short-term resistance near $82.00. I would probably look for a dip near the $82.00-81.50 zone as our next entry point.

Current Position: Long the December $85.00 CALLS (symbol:NKE1018L85) Entry @ $1.15

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


VimpelCom Ltd - VIP - close 15.82 change +0.29

Stop Loss: 14.80
Target(s): 16.75, 17.75
Current Option Gain/Loss: -23.8%
Time Frame: 6 to 8 weeks
New Positions: Yes, on dips

Comments:
11/18: VIP managed a +1.8% gain on Thursday and shares appear to be breaking out from their recent consolidation but it's a little too early to tell just yet. I would still consider bullish positions on a dip near $15.50. 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

Lubrizol Corp. - LZ - close: 105.00 change: +1.15

Stop Loss: 110.25
Target(s): 100.50
Current Option Gain/Loss: +17.2%
Time Frame: 3 to 4 weeks
New Positions: No

Comments:
11/18: LZ spiked higher this morning but gains faded after the stock rolled over under its 50-dma. This could be a new bearish entry point to buy puts. You may want to keep your position size small to limit your risk.

Current Position: Long the December $105 puts (symbol:LZ1018X105)
Entry @ $2.90

Entry on November 10th at $107.68
Earnings Date 02/03/11 (unconfirmed)
Average Daily Volume = 525 thousand
Listed on November 9th, 2010


Oceaneering Intl. Inc. - OII - close: 69.85 change: +1.05

Stop Loss: 71.05
Target(s): 64.50, 62.25
Current Option Gain/Loss: -24.1%
Time Frame: 3 to 4 weeks
New Positions: No

Comments:
11/18: Energy stocks were big winners today thanks to a decline in the dollar. The OSX oil services index rallied +2.4%. OII lagged its peers with a +1.5% gain. OII's rally seemed to struggle near $70.55. I remain very cautious here and we're not suggesting new bearish positions at this time. Readers may want to exit early to limit losses.

Current Position: Long the December $65.00 puts (OII1018x65) Entry @ $1.45

Entry on November 15th at $69.21
Earnings Date 02/17/11
Average Daily Volume = 1.0 million
Listed on November 13th, 2010


Research In Motion - RIMM - close: 57.25 change: +1.33

Stop Loss: 60.25
Target(s): 55.05, 53.00
Current Option Gain/Loss: - 9.4%
Time Frame: 1 to 2 weeks
New Positions: No

Comments:
11/18: RIMM was actually downgraded to a "hold" this morning but that didn't stop shares from rising with the rest of the market. RIMM appeared to roll over under the $58.00 level this afternoon, which is exactly where we expected to see some resistance. If the rally continues then look for resistance near $60.00 and the 200-dma. I would prefer to see the bounce roll over before buying puts again.

Current Position: Long the December $55 puts (RIMM1018X55) Entry @ $2.53

Entry on November 16th at $57.28
Earnings Date 12/16/10
Average Daily Volume = 17.6 million
Listed on November 15th, 2010


CLOSED BEARISH PLAYS

F5 Networks - FFIV - close: 120.51 change: +5.50

Stop Loss: 121.10
Target(s): 105.25
Current Option Gain/Loss: -45.6%
Time Frame: 2 to 3 weeks
New Positions: Yes

Comments:
11/18: Our aggressive put play on FFIV did not pan out. With the market in widespread rally mode shorts were in a panic to get out of the way. FFIV opened at $117.99 and surged to almost $122 before fading back toward $120. Our stop loss was hit at $121.10. I am not convinced the correction is over yet but I would not open new bearish positions at this time.

Closed Position: Long the 2010 December $105 puts (FFIV1018X105) Entry @ $2.85, Exit @ $1.55 (-45.6%)

Chart:

Entry on November 17th at $114.50
Earnings Date 01/19/11
Average Daily Volume = 2.9 million
Listed on November 16th, 2010