Editor's Note:

Strength in the small caps is encouraging if you're bullish on the market. The Russell 2000 closed near its best levels of the day at three-year highs. On our plays list we had a planned exit in CMP. FDS hit our final exit target. AAP hit our stop loss.

-James

Current Portfolio:


CALL Play Updates

Caterpillar Inc. - CAT - close: 100.61 change: +0.14

Stop Loss: 93.90
Target(s): 99.90, 104.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
02/08 update: CAT traded under $100 this morning but managed to eke out a small gain by the close. The short-term trend is up but CAT is looking a little bit overbought here. We want to buy calls on a dip. Right now I am aiming to buy calls at $96.50. Our targets are $99.90 and $104.00.


The Point & Figure chart for CAT is bullish with a $112 target.

Trigger @ 96.50

Buy the March $100 calls (CAT1119C100) current ask $2.92

Entry on February xxth at $ xx.xx
Earnings Date 04/21/11 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on February 5th, 2010


Coach Inc. - COH - close: 57.21 change: +1.32

Stop Loss: 53.49
Target(s): 58.50, 62.00
Current Option Gain/Loss: +47.6%, and + 94.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/08 update: COH is performing very well with another strong session. Shares added +2.3% and will soon be challenging its 2010 highs near $58.50. Don't forget our first exit target is $58.50. Please note that I am raising our stop loss to $53.49. I would still consider new positions here or on a dip back toward $55.00. Keep in mind that the $60.00 level could end up being round-number, psychological resistance.

- Suggested Positions -

Long the 2011 March $55.00 calls (COH1119C55) Entry @ $2.10

- or -

Long the 2011 March $57.50 calls (COH1119C57.5) Entry @ $0.85

02/08: New stop loss @ 53.49

Entry on February 7th at $55.35
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 4.1 million
Listed on January 31st, 2011


Costco Wholesale Corp. - COST - close: 74.80 change: +0.55

Stop Loss: 72.95
Target(s): 79.75
Current Option Gain/Loss: Unopened
Time Frame: 3+ weeks
New Positions: Yes, see Trigger

Comments:
02/08 update: COST extended its gains on Tuesday and closed with a new 52-week high. Shares are quickly nearing resistance at the $75.00 area. I would be tempted to buy calls right now but COST has significant resistance near $75.00 dating back to early 2008. The old high was $75.23. I am suggesting we use a trigger to buy calls on a breakout at $75.50. If triggered our target is $79.75. However, we will plan to exit ahead of COST's early March earnings report. That gives us three or four weeks.

The Point & Figure chart for COST is bullish with an $88 target.

Trigger @ 75.50

- Suggested Positions -

Buy the March $75 calls (COST1119C75) current ask $1.39

Entry on February xxth at $ xx.xx
Earnings Date 03/02/11 (confirmed)
Average Daily Volume = 5.8 million
Listed on February 7th, 2010


Donaldson Company, Inc. - DCI - close: 59.93 change: +0.37

Stop Loss: 57.40
Target(s): 62.50, 64.75
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see trigger

Comments:
02/08 update: Shares of DCI appear to be gathering up steam for a bullish breakout through resistance near $60.00. I am suggesting a trigger to buy calls at $60.35. If triggered we'll use a stop at $57.40. Our targets are $62.50 and $64.75. We will plan to exit ahead of the late February earnings report.

Trigger @ 60.35 (Small Positions)

- Suggested Positions -

Buy the 2011 March $60 calls (DCI1119C60) Current ask $1.75

02/05 Switched from puts to calls. Trigger @ 60.35

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


PACCAR Inc. - PCAR - close: 51.49 change: +0.52

Stop Loss: 49.45
Target(s): 53.85
Current Option Gain/Loss: +30.0%, and +14.2%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/08 update: The bounce in PCAR is improving. Shares added +1% on slightly above normal volume. I would still buy calls on another bounce from the $50.00 level. Our exit target is $53.85. This should be a short-term trade. Aggressive traders could use February calls. I'm listing both February and March. Just remember that Februarys expire in two weeks.

Note: A lot of the option strikes are odd. PCAR must have had some sort of dividend.

Open Small Positions Now

Long the February $49.70 call (PCAR1119B49.7) Entry @ $1.50

- or -

Long the March $55 call (PCAR 1119C55) Entry @ $0.35

Entry on February 7th at $50.60
Earnings Date 04/20/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on February 5th, 2010


CBOE Market Volatility Index - VIX - close: 15.81 change: -0.47

Stop Loss: N/A
Target(s): 24.00, 28.00
Current Option Gain/Loss: -53.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/08 update: The VIX saw a sharp spike lower on Tuesday morning and hit 14.86, which was a new multi-year low. The VIX has not traded that low since summer of 2007. I have been suggesting that we could open new positions near the 15.50 area. Now we have a new low as a reference point and traders could place their stop loss under 14.86. I would start with very small positions.

Earlier Comments:
Just because the VIX bounced near the 15.00-15.50 level in the past 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

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


Wynn Resorts - WYNN - close: 120.18 change: +2.17

Stop Loss: 115.80
Target(s): 129.00, 135.00
Current Option Gain/Loss: -16.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/08 update: Our call play on WYNN has been opened. Positive analyst comments helped lift WYNN to an early high of $122.89. We had a trigger to buy calls at $122.00. Given the late afternoon bounce off its lows I would still consider new positions now. Our targets are $129.00 and $134.50.

Upon further review it looks like our stop loss is a little too tight. I'm moving our stop to $115.80, which gives WYNN about 5% wiggle room.

- Suggested Positions -

Long the March $130 calls (WYNN1119C130) Entry @ 2.75

02/08 New stop loss @ 115.80, triggered at $122.00

chart:

Entry on February 8th at $122.00
Earnings Date 02/24/11 (unconfirmed)
Average Daily Volume = 2.0 million
Listed on February 3rd, 2010


PUT Play Updates

Citrix Systems - CTXS - close: 65.67 change: -0.66

Stop Loss: 68.05
Target(s): 60.10, 58.00
Current Option Gain/Loss: -84.2%, and -55.0%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Comments:
02/08 update: CTXS underperformed the NASDAQ today with a -0.99% decline. Yet I would hesitate to launch new bearish positions. 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

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


Google Inc. - GOOG - close: 618.38 change: + 4.09

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:
02/08 update: GOOG is bouncing back toward short-term resistance near $620 but this has no impact on our strangle trade. At this point our strangle trade is dead in the water and has very little hope before expiration. 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: $0.40 (-97.3%)

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: 81.23 change: +0.57

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

Comments:
02/08 update: If you're bullish then the relative strength in the small caps is encouraging. I've been suggesting nimble traders buy calls on a move over $80.00 or $80.75. Now we might want to buy calls on a dip near $80.00 instead. Our put play has been dead for a couple of days now so we'll ride it out through expiration and see what happens.

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

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


CLOSED BULLISH PLAYS

Compass Minerals - CMP - close: 94.40 change: +0.21

Stop Loss: 91.90
Target(s): 94.75, 99.00
Current Option Gain/Loss: + 60.0%, and +50.0%
Time Frame: a few days
New Positions: See below

Comments:
02/08 update: Our time for this trade has expired. It was our plan to exit option positions at the close today to avoid holding over earnings. CMP reported results that were in-line with expectations and I have not noticed any afterhours action in the stock price.

Readers may want to keep CMP on their watch list. Another bounce near $90.00 could be another bullish entry point.

- Suggested Positions -

2011 February $95.00 calls (CMP1119B95) Entry @ $1.25, Exit @ 2.00 (+60%)

- or -

2011 March $95 calls (CMP1119C95) Entry @ $2.00, Exit @ 3.00 (+50%)

02/08 Planned exit. Options @ +60% and +50%
02/07 New stop loss @ 91.90
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


FactSet Research Systems - FDS - close: 103.57 change: +0.74

Stop Loss: 97.40
Target(s): 99.90, 103.50
Current Option Gain/Loss: +122.4%, and +178.5%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/08 update: Target achieved. FDS is still melting higher and shares hit $103.73 today. Our official exit target was hit at $103.50. I would keep FDS on your watch list as another dip or bounce near $98 could be another entry point.

FYI: Sadly the Feb. $100 calls have extremely wide spreads. You might be able to profit a better gain if you place your limit order to exit inside the spread instead of a market order but you run the risk of not getting filled. (today's spread was $1.95 bid/$4.10 ask) Earlier the bid on the Feb. $100 call was higher.

Small Positions

2011 February $95 call (FDS1119B95) Entry @ $2.90, Exit @ 6.45 (+122.4%)

- or -

2011 February $100 call (FDS1119B100) Entry @ $0.70, Exit @ 1.95 (+178.5%)

02/08 Target hit @ 103.50. Options @ +122% and +178%
02/07 New stop loss @ 97.40
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


CLOSED BEARISH PLAYS

Advance Auto Parts Inc. - AAP - close: 64.90 change: +0.40

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:
02/08 update: AAP tagged a new relative high and briefly traded above its 50-dma. Shares hit $65.23 intraday, which was enough to hit our stop loss at $65.05.

- Suggested Small Positions -

2011 Feb. $60.00 puts (AAP11N60) Entry @ $0.50, Exit 0.25 (-50%)

02/08 Stopped out @ 65.05. Option @ -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