Editor's Note:

The market was focused on developments in Egypt again. Traders quickly bought the dip in stocks this morning with bulls still firmly in control. Our DCI call play has been triggered and our CTXS put play has been stopped out.

-James

Current Portfolio:


CALL Play Updates

Caterpillar Inc. - CAT - close: 99.79 change: -0.82

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:
02/10 update: Traders were too quick to buy the dip in CAT. The stock hit $98.75 before bouncing higher again. Maybe instead of waiting for a dip at $96.50 we might want to consider buying a breakout past $101.00 instead. However, I'm not quite ready to make that call just yet. For now we'll wait for $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: 57.61 change: +0.20

Stop Loss: 53.49
Target(s): 58.50, 62.00
Current Option Gain/Loss: +57.1%, and +105.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/10 update: COH was up 20 cents for the second day in a row. The stock looks a tiny bit overbought here and I would not be surprised to see a dip back toward $55.00, which should be new support. I would still consider new positions 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: 74.55 change: -0.12

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

Comments:
02/10 update: Thursday was another quiet day of trading for COST. Shares are still churning in the $74-75 zone. The $75.00 level has been resistance for a long time. 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: 59.91 change: +0.18

Stop Loss: 57.40
Target(s): 62.50, 64.75
Current Option Gain/Loss: -13.8%
Time Frame: just a few days
New Positions: see below

Comments:
02/10 update: The rally in DCI today was pretty under-whelming. Shares briefly traded over resistance at $60.00 and hit $60.38 intraday. That was enough to trigger our bullish positions at $60.35. Unfortunately the fact that DCI did not hold the breakout over $60.00 is very worrisome to me. I would not open new positions until we see DCI over $60.50 at this point.

We now have a stop loss at $57.40. Our targets are $62.50 and $64.75. We will plan to exit ahead of the late February earnings report.

NOTE: Our time frame for this trade has change significantly. Previously we thought DCI would report earnings around Feb. 23rd. Now DCI is due to report earnings on Feb. 16th before the opening bell. This means we need to exit our positions on Tuesday, Feb. 15th at the close to avoid the risk of holding over the announcement.

(Small Positions) - Suggested Positions -

Long the 2011 March $60 calls (DCI1119C60) Entry @ $1.80

02/10 Time frame for this trade has changed!
02/10 Bullish Trigger hit @ 60.35
02/05 Switched from puts to calls. Trigger @ 60.35

chart:

Entry on February 10th at $60.35
Earnings Date 02/23/11 (unconfirmed)
Average Daily Volume = 208 thousand
Listed on January 31st, 2011


Fastenal Co. - FAST - close: 63.41 change: +0.74

Stop Loss: 58.70
Target(s): 64.75, 67.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see Trigger

Comments:
02/10 update: FAST is still in rally mode with the stock up six days in a row. We do not want to chase it here.

I am suggesting we wait for a dip and use a trigger at $61.00 to open bullish call positions. If triggered we'll use a stop loss at $58.70. Our targets are $64.75 and $67.25. FYI: The Point & Figure chart for FAST is bullish with a $73 target. Readers may want to keep in mind that the most recent data listed short interest at 11.4% of the 132 million-share float.

Trigger @ 61.00

- Suggested Positions -

Buy the March $60 calls (FAST1119C60) current ask $3.30

- or -

Buy the March $65 calls (FAST1119C65) current ask $0.75

Entry on February xxth at $ xx.xx
Earnings Date 04/12/11 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on February 8th, 2010


Nike Inc. - NKE - close: 86.79 change: -0.46

Stop Loss: 83.85
Target(s): 88.00, 89.90
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see Trigger

Comments:
02/10 update: NKE briefly traded lower this morning but failed to pierce Tuesday's low. I don't see any changes from my Wednesday night comments.

I am suggesting we buy calls on a dip at $85.25. If triggered we'll use a stop loss at $83.85. Our targets are $88.00 and $89.90.

Trigger @ $85.25

- Suggested Positions -

Buy the March $85 calls (NKE1119C85) current ask $3.70

- or -

Buy the April $90 calls (NKE1116D90) current ask $1.76

Entry on February xxth at $ xx.xx
Earnings Date 03/17/11 (unconfirmed)
Average Daily Volume = 2.2 million
Listed on February 9th, 2010


PACCAR Inc. - PCAR - close: 51.47 change: +0.63

Stop Loss: 49.45
Target(s): 53.85
Current Option Gain/Loss: +20.0%, and - 0.0%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/10 update: Bulls went back to buying the dip in PCAR today and shares outperformed the S&P 500 with a +1.2% gain. 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 soon.

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: 16.09 change: +0.22

Stop Loss: N/A
Target(s): 24.00, 28.00
Current Option Gain/Loss: -50.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
02/10 update: The VIX spiked toward the 17.00 level this morning but eventually settled back near the 16.00 level. I don't see any changes from my prior comments.

I have been suggesting that we could open new positions near the 15.50 area. The spike down on Feb. 8th offers a new low as a reference point and traders could place their stop loss under 14.86. Officially we don't have a stop loss on this aggressive, speculative trade. 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


PUT Play Updates

Google Inc. - GOOG - close: 616.44 change: - 0.06

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:
02/10 update: It was a very uneventful day for GOOG with the stock falling six cents. At this point our strangle trade is dead in the water and has very little hope before expiration.

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: $0.35 (-97.6%)

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: 81.19 change: +0.32

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

Comments:
02/10 update: The IWM looks poised to breakout past the $81.30 level. It might be time to buy to buy some calls. Traders quickly bought the dip this morning at $80.24.

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

Wynn Resorts - WYNN - close: 120.15 change: -1.38

Stop Loss: 115.80
Target(s): 129.00, 135.00
Current Option Gain/Loss: -22.9%
Time Frame: -- time is up --
New Positions: see below

Comments:
02/10 update: WYNN recently changed its earnings report date so we had to adjust our exit strategy. The plan was to exit today, at the closing bell, to avoid holding over earnings. After the bell WYNN reported earnings that were better than expected but shares were trading lower near $118.

- Suggested Positions -

March $130 calls (WYNN1119C130) Entry @ 2.75, Exit $2.12 (-22.9)

02/10 Exit early to avoid earnings. Option @ -22.9%
02/09 Time frame changed. WYNN updated their earnings release date. Prepare to exit tomorrow on Feb. 10th at the closing bell
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


CLOSED BEARISH PLAYS

Citrix Systems - CTXS - close: 68.63 change: +3.46

Stop Loss: 68.05
Target(s): 60.10, 58.00
Current Option Gain/Loss: -87.3%, and -67.5%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
02/10 update: Something happened today with CTXS but I can't find it. It could be a rival's earnings report or another bit of news somewhere but shares of CTXS exploded higher, outperforming the S&P 500 and the NASDAQ. CTXS barely saw any dip lower this morning so the event or headline probably occurred this morning. Unfortunately, the stock surged through several layers of resistance to a +5.3% gain and hit our stop loss at $68.05 closing this trade. Our initial plan was to start with small (half-sized) positions to limit our risk.

- (small positions) -

Feb. $60 PUTs (CTXS1119N60) Entry @ $0.95, Exit near $0.12 (-87.3%)

- or -

Mar. $60 PUTs (CTXS1119O60) Entry @ $2.00, Exit near $0.65 (-67.5%)

02/10 Stopped out @ 68.05. Options @ -87.3% and -67.5%
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