Editor's Note:

The market recovered from its morning lows with gold miners leading the bounce as gold hits two-week highs. Overall it was a relatively quiet day for the newsletter.

-James

Current Portfolio:


CALL Play Updates

Coach Inc. - COH - close: 54.20 change: +0.34

Stop Loss: 52.49
Target(s): 58.50, 62.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
02/03 update: Several big retailers reported stronger than expected same-store sales in January even though the market feared a miss due to weather. The RLX retail index gained +1.2%. Shares of COH added +0.6% and it looks like this stock is coiling for a breakout past resistance near $55 soon.

I am suggesting a trigger to buy calls at $55.35. If triggered we'll target a move to $58.50 and $62.00 but keep in mind that the $60.00 level could end up being round-number, psychological resistance.

Trigger @ $55.35

- Suggested Positions -

Buy the 2011 March $55.00 calls (COH1119C55)

- or -

Buy the 2011 March $57.50 calls (COH1119C57.5)

Entry on February xxth at $ xx.xx
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 4.1 million
Listed on January 31st, 2011


Compass Minerals - CMP - close: 93.82 change: -1.20

Stop Loss: 89.85
Target(s): 94.75, 99.00
Current Option Gain/Loss: + 56.0%, and +45.0%
Time Frame: a few days
New Positions: See below

Comments:
02/03 update: We only have three trading days left. CMP reports earnings on Feb. 8th after the closing bell and we do not want to hold over the announcement. Thus more conservative traders may want go ahead and exit now. Currently our stop is $89.85. Readers may want to inch their stops higher.

- Suggested Positions -

Long the 2011 February $95.00 calls (CMP1119B95) Entry @ $1.25

- or -

Long the 2011 March $95 calls (CMP1119C95) Entry @ $2.00

02/03 New stop loss @ 89.90
02/01 Target Hit @ 94.75. Feb. call @ $2.50 (+100%)
Mar. call @ $3.30 (+65%)
02/01 New stop loss @ 89.85

Entry on January 28th at $91.00
Earnings Date 02/08/11 (confirmed)
Average Daily Volume = 210 thousand
Listed on January 27th, 2010


FactSet Research Systems - FDS - close: 101.36 change: -0.32

Stop Loss: 95.75
Target(s): 99.90, 103.50
Current Option Gain/Loss: + 89.6%, and +207.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/03 update: FDS is still digesting gains and could be vulnerable to a drop back toward the $98 area. Currently our final exit target is $103.50 but I would seriously consider an early exit right here. I am not suggesting new positions at this time.

Small Positions

Long the 2011 February $95 call (FDS1119B95) Entry @ $2.90

- or -

Long the 2011 February $100 call (FDS1119B100) Entry @ $0.70

02/02 Consider locking in gains now (Options @ +124% and +242%)
01/29 Consider an Early Exit now!
01/27 New stop loss @ 95.75
01/27 1st Target Hit @ 99.90. Feb. $95 call @ $4.25 (+46.5%)
01/27 1st Target Hit @ 99.90. Feb. $100 call @ $1.45 (+107%)

Entry on January 25th at $96.64
Earnings Date 03/16/11 (unconfirmed)
Average Daily Volume = 181 thousand
Listed on January 24th, 2010


Perrigo Co. - PRGO - close: 71.58 change: -1.18

Stop Loss: 69.90
Target(s): 79.00
Current Option Gain/Loss: -44.9%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/03 update: PRGO is still slipping lower and is nearing support near the $70 area. This looks like a bullish entry point to buy the dip but more conservative traders might want to wait for some strength. The plan was to use small positions to limit our risk. Our target is $79.00.
The Point & Figure chart for PRGO is bullish with an $85 target.

- Small Positions to Limit our Risk -

Long the March $75 calls (PRGO1119C75) Entry @ $2.18

Entry on February 2nd at $73.61
Earnings Date 02/01/11 (confirmed)
Average Daily Volume = 915 thousand
Listed on February 1st, 2010


CBOE Market Volatility Index - VIX - close: 16.69 change: -0.61

Stop Loss: N/A
Target(s): 24.00, 28.00
Current Option Gain/Loss: -31.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/03 update: Volatility is contracting again. I would be VERY tempted to launch new positions again if the VIX nears the 2010 and 2011 lows near 15.50. The short-term trend is now down. More conservative traders will want to consider an early exit now to preserve capital. I am not suggesting new positions at this time.

We have two targets to take profits at 24.00 and at 28.00.

- Suggested Positions -

Long the 2011 March $22.50 calls (VIX1116C22.5) Entry @ $1.60

Entry on January 26th at $17.00
Earnings Date --/--/--
Average Daily Volume =
Listed on January 25th, 2010


PUT Play Updates

Advance Auto Parts Inc. - AAP - close: 62.48 change: +0.87

Stop Loss: 65.05
Target(s): 60.25, 58.00
Current Option Gain/Loss: + 50.0%
Time Frame: 6 trading days
New Positions: see below

Comments:
02/03 update: AAP produced a bit of a bounce after yesterday's big drop. We only have four trading days left so I'm a little reluctant to open new positions.

We want to exit ahead of the earnings announcement. The Point & Figure chart for AAP is bearish with a $52 target.

- Suggested Small Positions -

Long the 2011 Feb. $60.00 puts (AAP11N60) Entry @ $0.50

02/02 New stop loss @ 65.05

Entry on February 1st at $64.22
Earnings Date 02/09/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on January 31st, 2011


BorgWarner Inc. - BWA - close: 65.72 change: -0.02

Stop Loss: 70.10
Target(s): 63.50, 60.25
Current Option Gain/Loss: +19.7%, and +20.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/03 update: Hmm... be careful here. We're down to our last four days before we have to exit in front of earnings. BWA dipped to $64.22 intraday but the bounce back this afternoon makes this look like a short-term bottom. I am somewhat reluctant to open new positions with just a few days left. Our targets are $63.50 and $60.25. FYI: The Point & Figure chart for BWA has turned bearish.

Use small positions to limit our risk.

- (small positions) -

Long the Feb. $65 PUTs (BWA1119N65) Entry @ $1.42

- or -

Long the Mar. $65 PUTs (BWA1119O65) Entry @ $2.25

02/02 New stop loss @ 70.10

Entry on January 31st at $67.77
Earnings Date 02/10/11 (confirmed)
Average Daily Volume = 2.0 million
Listed on January 29th, 2010


Citrix Systems - CTXS - close: 65.18 change: -0.60

Stop Loss: 67.65
Target(s): 60.10, 58.00
Current Option Gain/Loss: -68.4%, and -40.0%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Comments:
02/03 update: Traders bought the dip in CTXS again. I would be tempted to wait for a close under $64.00 before initiating new positions. Previously I suggested that readers buy half their position at the start and if we see another failed rally near $66 then we can buy our second half. Our targets are $60.10 and $58.00.

- (small positions) -

Long the Feb. $60 PUTs (CTXS1119N60) Entry @ $0.95

- or -

Long the Mar. $60 PUTs (CTXS1119O60) Entry @ $2.00

Entry on January 31st at $63.43
Earnings Date 01/26/11
Average Daily Volume = 3.2 million
Listed on January 29th, 2010


Donaldson Company, Inc. - DCI - close: 58.72 change: -0.02

Stop Loss: 60.35
Target(s): 52.75, 50.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
02/03 update: DCI managed another bounce at technical support with its rising 50-dma. There is no change from my prior comments.

If this stock can breakout past $60.00 we will want to consider buying call options instead. For now the plan is to buy puts with a trigger to initiate positions at $57.45. If triggered we'll aim for a drop to $52.75 and $50.50. I would keep your position size small to limit our risk.

Trigger @ 57.45 (Small Positions)

- Suggested Positions -

Buy the 2011 March $55 puts (DCI1119O55)

Entry on February xxth at $ xx.xx
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume = 208 thousand
Listed on January 31st, 2011


Google Inc. - GOOG - close: 610.15 change: - 1.85

Stop Loss: n/a
Target(s): n/a
Current Option Gain/Loss: see below
Time Frame: 1 month
New Positions: No

THIS IS A STRANGLE TRADE (not a simple put play)

Comments:
02/03 update: GOOG is hovering near the $610 level. I don't see any changes from my prior comments. No new strangle positions at this time.

STRANGLE TRADE: Buy an out of the money CALL and PUT

STRANGLE #2 (February) initial cost $15.10, currently: $1.85 (-87.7%)

2011 February $680 call (GOOG1119B680) Entry @ $6.20

- AND -

2011 February $580 put (GOOG1119N580) Entry @ $8.90

01/22: Exit the January strangle at the open.

Entry on January 20th at $626.77
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on January 19th, 2010


iShares Russell 2000 Index - IWM - close: 79.73 change: -0.30

Stop Loss: --.--
Target(s): 75.00
Current Option Gain/Loss: -98.1%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
02/03 update: I really debated on whether or not we should exit our IWM put play tonight. It certainly looks like the market wants to run higher from here. Unfortunately, if we did "exit" here we're not saving anything. Our put option has almost evaporated to nothing (currently bidding 3 cents). At this point the play is a loss. I'm suggesting we let it ride at this point and remove our stop loss. We still have two weeks left and anything could happen. So at this point, no stop loss and no new put positions. Nimble traders may want to consider buying calls on a move past $80.00 or $80.70.

Small Position only

Long the 2011 February $77 puts (IWM1119N77) Entry @ $1.65

02/03 Remove the stop loss
01/29 New stop loss @ 80.25

Entry on January 20th at $78.14
Earnings Date --/--/--
Average Daily Volume = 38 million
Listed on January 19th, 2010


Kohl's Corp. - KSS - close: 51.06 change: +0.31

Stop Loss: 52.25
Target(s): 47.00, 45.50
Current Option Gain/Loss: Unopened
Time Frame: 3 weeks
New Positions: Yes, see trigger

Comments:
02/03 update: Analysts were expecting KSS to report +2.4% same-store sales growth in January. The company only hit +1.4%. That's why shares underperformed the retail sector. I don't see any changes from my prior comments.

I am suggesting a trigger to buy puts at $49.75. If triggered we'll use a stop loss at $52.25. Our exit targets are $47.00 and $45.50. We want to close this trade before KSS reports earnings in late February. I'm suggesting March puts but more aggressive traders could use February puts. Let's keep our position size small.

Trigger @ 49.75

- Suggested Small Positions -

Buy the March $50 PUT (KSS1119O50) current ask $1.40

Entry on February xxth at $ xx.xx
Earnings Date 02/24/11 (confirmed)
Average Daily Volume = 4.9 million
Listed on February 2nd, 2010


Panera Bread Co. - PNRA - close: 98.93 change: +1.05

Stop Loss: 100.05
Target(s): 95.15, 91.00
Current Option Gain/Loss: -52.6%
Time Frame: 3 weeks
New Positions: see below

Comments:
02/03 update: We've only got five trading days left on this trade but we may not make it. The oversold bounce has reached round-number resistance at the $100 level. All it would take is an intraday spike higher to hit our stop and close this trade. I am not suggesting new positions at this time.

- Suggested Positions - (small positions)

Long the 2011 February $95 PUTS (PNRA1119N95) Entry @ $2.85

01/29 New stop loss @ 100.05
01/28 1st Target Hit @ 95.15, option @ $3.20 (+12.2%)
01/26 New stop loss @ 100.55, target adjusted from 95.50 to 95.15

Entry on January 24th at $97.96
Earnings Date 02/10/11 (unconfirmed)
Average Daily Volume = 364 thousand
Listed on January 22nd, 2010


CLOSED BEARISH PLAYS

Decker's Outdoor Corp. - DECK - close: 79.61 change: +3.06

Stop Loss: 80.25
Target(s): 70.50, 65.50
Current Option Gain/Loss: -66.0%, and -37.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/03 update: It's time to hit the escape button on DECK. Several major retailers reported better than expected January same-store sales today. The news fueled consumer discretionary stocks and DECK was one of them with a +4% rally as shares broke through resistance near the $78 level. Today's rally did pause at round-number resistance at $80.00 but I don't expect it will hold. I'm suggesting an early exit now to cut our losses.

- Suggested Positions -

2011 February $75.00 PUTS (DECK1119N75) Entry @ $2.65, Exit $0.90 (-66%)

- or -

2011 March $75.00 PUTS (DECK1119O75) Entry @ $4.80, Exit $3.00 (-37.5%)

02/03 Exit Early. Options at -66% and -37.5%
01/27 DECK hit our trigger to buy puts at $77.00

chart:

Entry on January 27th at $77.00
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on January 20th, 2010