Editor's Note:

The stock market produced a huge intraday reversal higher. We had multiple targets hit and we've updated several stop losses. We're suggesting an early exit on a few trades.

-James

Current Portfolio:


CALL Play Updates

Check Point Software - CHKP - close: 53.07 change: +1.37

Stop Loss: 50.80
Target(s): 55.75 , 57.75
Current Option Gain/Loss: -30.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/04 update: CHKP dipped under technical support at its exponential 200-dma but managed to bounce at $50.85. Our stop is at $50.80. The big rebound and close back above $51 and its 200-dma could be used as a bullish entry point.

- Suggested Positions -

Long OCT $55 call (CHKP1122J55) Entry $1.80

10/03 testing support near $51.00, consider an early exit
10/01 readers may want to consider an early exit now.
09/26 trade opened.

Entry on September 26 at $53.00
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 1.6 million
Listed on September 20, 2011


Hewlett Packard - HPQ - close: 23.02 change: +0.82

Stop Loss: 21.45
Target(s): 29.50
Current Option Gain/Loss: + 8.4%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/04 update: It was an ugly open with HPQ gapping below what should have been support at $22.00. Fortunately, traders quickly bought the dip and shares surged from its intraday low of $21.84 to $23.02 (a +5.4% move). Readers can use this bounce as a new entry point to buy calls.

- Suggested Positions -

Long 2012 Jan. $24 call (HPQ1221A24) Entry $2.14

09/27 new stop loss @ 21.45

Entry on September 23 at $22.52
Earnings Date 11/21/11 (unconfirmed)
Average Daily Volume = 26.6 million
Listed on September 22, 2011


PUT Play Updates

Panera Bread Co. - PNRA - close: 105.70 change: +4.53

Stop Loss: 107.25
Target(s): 98.00, 92.50
Current Option Gain/Loss: Oct$100: -30.0% & NOV$95: -17.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/04 update: The gains on our puts just evaporated into losses with PNRA's participation in the market's widespread rebound. The larger trend is still bearish but there is a good chance PNRA continues to bounce. More conservative traders will want to seriously consider an early exit right here. You could exit now and wait for a new failed rally as another entry point. The newsletter is choosing to lower our stop loss down to $107.25.

Earlier Comments:
FYI: I do need to caution readers that the most recent data listed short interest at about 10% of PNRA's small float of approximately 28 million shares. That's above average short interest and a widespread market bounce could spark some short covering.

- Suggested Positions -

Long OCT $100 PUT (PNRA1122V100) Entry $3.50

- or -

Long NOV $95 PUT (PNRA1119W95) Entry $4.60

10/04 new stop loss @ 107.25.

Entry on October 03 at $103.01
Earnings Date 10/25/11 (unconfirmed)
Average Daily Volume = 574 thousand
Listed on October 01, 2011


Regal-Beloit - RBC - close: 44.87 change: +1.90

Stop Loss: 46.25
Target(s): 43.50, 40.50
Option Gain/Loss: (wide spreads) Oct$45: +80.0% & Nov$45: +28.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/04 update: RBC spiked down to 41.65 this morning before managing to erase a good chunk of yesterday's losses. If RBC can clear the $45.00 level there is a good chance the bounce carries it toward the simple 10-dma near $48.35. More conservative traders may want to exit now to lock in gains or lower their stop loss near the $45.00 level. We are adjusting our stop down to $46.25.

Warning! The option spreads are a little wide. We want to keep our position size small to limit our capital at risk.

- Suggested Positions - (small positions)

Long OCT $45 PUT (RBC1122V45) Entry $1.00

- or -

Long NOV $45 PUT (RBC1119W45) Entry $2.30

10/04 new stop loss @ 46.25, readers may want to just exit early now
10/03 new stop loss @ 48.25
10/03 1st target hit @ 43.50
bid Oct $45 put @ $2.50 (+150%)
bid Nov $45 put @ $3.90 (+69.5%)
10/01 new stop loss @ 49.25

Entry on September 29 at $49.01
Earnings Date 11/02/11 (unconfirmed)
Average Daily Volume = 456 thousand
Listed on September 28, 2011


Walter Energy Inc. - WLT - close: 58.16 change: +1.26

Stop Loss: 62.05
Target(s): 50.50
Current Option Gain/Loss: -25.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/04 update: I cautioned readers that WLT was a volatile stock. The stock traded in a wide range today (53.41-58.19). Our put play opened this morning at $55.72. I am concerned that today's trading action looks like an intraday bullish double bottom near $54. We have a stop loss at $62.05. More conservative traders may want to lower their stops. Aggressive traders may want to place their stop above the 10-dma instead (currently 62.85).

*Small Positions* - Suggested Positions -

Long OCT $50 PUT (WLT1122V50) Entry $2.95

Entry on October 04 at $55.72
Earnings Date 10/26/11 (unconfirmed)
Average Daily Volume = 4.2 million
Listed on October 03, 2011


CLOSED BULLISH PLAYS

Gold ETF - GLD - close: 157.64 change: -3.32

Stop Loss: 155.90
Target(s): 169.00
Current Option Gain/Loss: -44.6%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
10/04 update: The bounce in gold did not last long. Even though the U.S. dollar turned lower today it did not help gold prices. The GLD opened at $160.95 and quickly turned lower. The ETF plunged toward its recent lows near $155. Our stop loss was hit at $155.90.

*Small Positions*

- Suggested Positions -

OCT $165 call (GLD1122J165) Entry $3.25, Exit $1.80 (-44.6%)

10/04 stopped out at $155.90
10/04 opened at $160.95

Annotated Chart:

Entry on October 4 at $160.95
Earnings Date --/--/--
Average Daily Volume = 24.3 million
Listed on October 03, 2011


Ultra S&P500 ETF - SSO - close: 37.23 change: +1.41

Stop Loss: 30.95
Target(s): 36.75, 39.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
10/04 update: Sometimes the market does not want to cooperate. Yesterday we debated whether or not the entry point for this trade would be $35.00 or $34.00. We selected a trigger at $34.00. Unfortunately the low today was only $34.17. The SSO produced a +8.9% bounce off this low.

Our entry point was not hit so we're dropping SSO as a candidate.

buy-the-dip Trigger @ $34.00

- Suggested Positions -

Trade Did Not Open

Annotated Chart:

Entry on October xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 25.1 million
Listed on October 03, 2011


CLOSED BEARISH PLAYS

iShares Russell 2000 ETF - IWM - close: 64.79 change: +3.80

Stop Loss: 65.25
Target(s): 60.50, 57.00
Current Option Gain/Loss: Oct$60: -27.7% & Nov$60: -12.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/04 update: Target achieved. Wow! It was a crazy day for stocks with two big swings. The IWM gapped open lower at $60.32, which was under our first target of $60.50. The bid on the October $60 put was at $2.94 (+59.7%) and the bid on the November $60 put was at $4.40 (+37.9%). Then the IWM rebounded sharply off the $60.00 level and closed up with a big gain of +6.2%. While the bounce looks like a bounce back to resistance in the $64-65 area it also produced a bullish reversal pattern. We are electing to exit any remaining positions immediately.

- Suggested Positions - (Small Positions)

OCT $60 PUT (IWM1122V60) Entry $1.84, final exit $1.33 (-27.7%)

- or -

NOV $60 put (IWM1119W60) Entry $3.19, final exit $2.80 (-12.2%)

10/04 exit early on the big bounce
10/04 1st target exceeded on gap down at $60.32
bid Oct. $60 put @ 2.94 (+59.7%)
bid Nov. $60 put @ 4.40 (+37.9%)
10/03 new stop loss @ 65.25

chart:

Entry on October 03 at $63.81
Earnings Date --/--/--
Average Daily Volume = 83.2 million
Listed on October 01, 2011


Pioneer Natural Res. - PXD - close: 65.31 change: +3.49

Stop Loss: 68.05
Target(s): 60.50, 56.00
Current Option Gain/Loss: Oct$60: -36.0% & Nov$60: -18.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/04 update: Target exceeded. PXD gapped open lower at $60.23 this morning. That was below our first target of $60.50. The bid on the October $60 put was $3.87 (+54.8%) and the bid on the November $60 put was $5.00 (+13.6%). Shares proceeded to hit $58.63 and then reversed course to produce a +11.3% rally off its intraday low. This is too much of a rebound to stand in front of. We are suggesting an early exit immediately.

- Suggested Positions - (Small Positions)

Long OCT $60 PUT (PXD1122V60) Entry $2.50*, final exit $1.60 (-36.0%)

- or -

Long NOV $60 PUT (PXD1119W60) Entry $4.40, final exit $3.60 (-18.1%)

10/04 readers should exit remaining position on this bounce
10/04 1st target exceeded on gap down at $60.23
bid Oct $60 put @ 3.87 (+54.8%)
bid Nov $60 put @ 5.00 (+13.6%)
10/03 new stop loss @ 68.05
*Oct. $60 put entry price is an estimate. Option did not trade at the open that morning.

chart:

Entry on October 03 at $64.87
Earnings Date 11/01/11 (confirmed)
Average Daily Volume = 1.8 million
Listed on October 01, 2011