Editor's Note:

The S&P 500 index is once again at new two-year highs. In spite of the geopolitical unrest and a lousy jobs report, investors continue to push stocks higher.

-James

Current Portfolio:


CALL Play Updates

Compass Minerals - CMP - close: 93.87 change: +0.05

Stop Loss: 89.85
Target(s): 94.75, 99.00
Current Option Gain/Loss: + 52.0%, and +40.0%
Time Frame: a few days
New Positions: See below

Comments:
02/05 update: CMP initially dipped lower at the open on Friday but shares spent the day drifting sideways on either side of $94. We have just two days left. We will plan to exit on Tuesday, Feb. 8th at the closing bell to avoid holding over CMP's earnings report. More conservative traders will want to seriously consider exiting now since any drop is going to hurt our fragile gains in this trade. I am not suggesting new bullish positions at this time.

- Suggested Positions -

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

- or -

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

02/05 Two days left. Plan to exit on Feb. 8th at the close
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

chart:

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


Coach Inc. - COH - close: 54.59 change: +0.39

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:
02/05 update: The coil continues for COH. The consolidation under resistance near $55 is narrowing and would suggest a bullish breakout higher is just around the corner. I don't see any changes from my prior comments.

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)

chart:

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


FactSet Research Systems - FDS - close: 101.91 change: +0.55

Stop Loss: 95.75
Target(s): 99.90, 103.50
Current Option Gain/Loss: +127.5%, and +242.8%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/05 update: FDS is holding up pretty well. After the action on Feb. 2nd I thought we might see a pull back. Shares are drifting higher. The stock is somewhat short-term overbought so we should expect a dip sooner rather than later. I am not suggesting new positions at this time but another dip or bounce near the $98 level could be an entry point. Right now our final exit target is $103.50.

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%)

chart:

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: 71.67 change: +0.09

Stop Loss: 69.90
Target(s): 79.00
Current Option Gain/Loss: -42.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/05 update: PRGO's trading on Friday doesn't offer us any clues. Shares traded in a very narrow range struggling with the $72 level. I would still consider new positions in the $71-70 zone but would keep the position size very small. More conservative traders may want to wait for some sign of strength first before considering new positions. We've got a stop loss at $69.90. The $68.00 level should actually be a lot more support than the $70.00 level but I don't want to risk that much of a move. More aggressive traders might want to consider a stop under $68. The initial 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

chart:

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: 15.93 change: -0.76

Stop Loss: N/A
Target(s): 24.00, 28.00
Current Option Gain/Loss: -39.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/05 update: Volatility is plunging. This index has fallen five days in a row since the big spike higher on January 28th. The 2011 lows are near 15.40 and the 2010 low was near 15.20. I would consider new bullish positions on a dip anywhere near the 15.50 area. Just because the VIX bounced above the 15.00 level doesn't mean it can go crashing through it but that would be a good area to speculate on a rebound. I will point out that between 2005 and 2006 the VIX was pretty much dead, limping along the 10.00 area for two years.

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

chart:

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


Wynn Resorts - WYNN - close: 118.06 change: -1.34

Stop Loss: 117.40
Target(s): 129.00, 135.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see TRIGGER

Comments:
02/05 update: The combination of LVS' post-earnings sell-off and the disappointing jobs number on Friday morning could have had a much bigger affect on shares of WYNN. Yet shares of WYNN just hovered sideways in the $118-119 zone. It's rival LVS lost -8.4%. I don't see any changes from my Thursday night comments. I am suggesting a trigger to launch bullish positions at $122.00. If triggered our targets are $129.00 and $134.50.

Trigger @ $122.00

- Suggested Positions -

Buy the March $130 calls (WYNN1119C130)

chart:

Entry on February xxth at $ xx.xx
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on February 3rd, 2010


PUT Play Updates

Advance Auto Parts Inc. - AAP - close: 63.98 change: +1.50

Stop Loss: 65.05
Target(s): 60.25, 58.00
Current Option Gain/Loss: - 10.0%
Time Frame: 6 trading days
New Positions: see below

Comments:
02/05 update: Bears can't seem to catch a break. AAP's recent breakdown has reversed higher. Now the stock is testing resistance in the $64-65 zone again. More conservative traders may want to cut their losses now with the option down -10%. I am not suggesting new positions at this time. We plan to exit this trade on Wednesday, Feb. 9th at the closing bell to avoid holding over AAP's earnings report. That's assuming we don't get stopped out first. Our stop is at $65.05.

- Suggested Small Positions -

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

02/02 New stop loss @ 65.05

chart:

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: 67.03 change: +1.31

Stop Loss: 70.10
Target(s): 63.50, 60.25
Current Option Gain/Loss: -11.9%, and + 0.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
02/05 update: Warning! Over the last couple of trading days BWA has produced what appears to be a bullish reversal pattern. The intermediate trend is still down but BWA looks poised to bounce. Shares should see resistance in the $67.50-68.00 zone and again near the $69.00-70.00 zone due to various trendlines and prior support. Yet more conservative traders may want to abandon ship right now while the February put is only down -12% and the March put is back to breakeven. We only have three trading days left and will plan to exit ahead of BWA's earnings report. I am not suggesting new bearish positions at this time. 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

chart:

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: 66.40 change: +1.22

Stop Loss: 68.05
Target(s): 60.10, 58.00
Current Option Gain/Loss: -78.9%, and -52.5%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Comments:
02/05 update: CTXS is just not cooperating. The stock is slowly working its way higher and outperformed the major averages on Friday with a +1.8% gain. Yet the stock is still trading under what looks like significant resistance near the $67.50 area. I did seriously consider an early exit for this trade and more cautious traders may want to exit now. I am not suggesting new positions at this time. Please note that I'm adjusting our stop loss to $68.05. Our initial plan was to start with small (half-sized) positions to limit our risk.

- (small positions) -

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

- or -

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

02/05 Adjusted stop loss to $68.05

chart:

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: 59.43 change: +0.71

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:
02/05 update: Given that the market refuses to relinquish its up trend I am switching our DCI play from a put play (which never opened) to a call play. Look for DCI in the new plays section as a call in tonight's newsletter. We'll wait for a breakout from this trading range.

Our trigger to buy puts was never hit.

02/05 Switched to a call play.

(No chart, see tonight's new plays)

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: 610.98 change: + 0.83

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:
02/05 update: The lack of any real movement in GOOG has crushed our strangle trade. The options are just evaporating toward the zero line. We've got two weeks left before February options expire? What are the odds that GOOG is going to move more than +/- 7% in the next two weeks?

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.

chart:

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: 79.87 change: +0.14

Stop Loss: --.--
Target(s): 75.00
Current Option Gain/Loss: -100.0%
Time Frame: 1 to 2 weeks
New Positions: see below

Comments:
02/05 update: The IWM is still consolidating sideways under resistance at the $80.00 level. Given the market's overall trend odds are good that this trade is not going to pan out. Nimble traders will want to consider buying calls on a breakout over resistance. I am not suggesting new bearish plays at this time.

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

chart:

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


Kohl's Corp. - KSS - close: 51.18 change: +0.12

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:
02/05 update: KSS continues to underperform its peers in the retail sector and is still stuck under its 200-dma. Yet I would not buy puts yet. Wait for the breakdown under the $50.00 mark.

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

chart:

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


CLOSED BEARISH PLAYS

Panera Bread Co. - PNRA - close: 98.87 change: -0.06

Stop Loss: 100.05
Target(s): 95.15, 91.00
Current Option Gain/Loss: -56.1%
Time Frame: 3 weeks
New Positions: see below

Comments:
02/05 update: As I feared PNRA briefly traded over resistance at $100.00 and reversed. Shares hit our stop loss at $100.05 closing this trade. The move looks like another failed rally and a potential entry point to buy puts again. However, PNRA is due to report earnings in just a few days and we do not want to hold over the announcement.

- Suggested Positions - (small positions)

2011 February $95 PUTS (PNRA1119N95) Entry @ $2.85, exit $1.25 (-56%)

02/04: Stopped out @ 100.05
02/04: Option @ $1.25 (-56.1%)
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

chart:

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