Editor's Note:

Edwards Lifesciences underperformed today, providing a nice exit for our put trade.

Overall trading was sloppy with most of the market closing lower. Much of the day was spent churning sideways with indecision as investors wait for the weekend EU summit. We also have October options expiration after Friday so we could see stocks get pinned to their nearest option strike price soon.

-James

Current Portfolio:


CALL Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 60.18 change: -0.81

Stop Loss: 58.90
Target(s): 64.75
Current Option Gain/Loss: -25.3%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
10/19 update: BBBY dipped back toward short-term, round-number support at $60.00. This could be used as a new bullish entry point although more conservative traders may want to tighten their stop loss.

*Small Positions*- Suggested Positions -

Long NOV $62.50 call (BBBY1119K62.5) Entry $1.50

Entry on October 14 at $61.00
Earnings Date 12/21/11 (unconfirmed)
Average Daily Volume = 3.4 million
Listed on October 12, 2011


Hewlett Packard - HPQ - close: 24.98 change: -0.63

Stop Loss: 24.45
Target(s): 29.50
Current Option Gain/Loss: +37.3%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/19 update: HPQ gave up most of yesterday's gains. The stock has closed under the $25.00 mark, which is short-term bearish. If there is any follow through lower in the tech sector tomorrow then odds are good we'll see HPQ hit our stop loss at $24.45.

- Suggested Positions -

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

10/17 HPQ could gap open lower tomorrow on IBM's earnings news
10/15 new stop loss @ 24.45
10/11 new stop loss @ 22.90
10/11 planned to sell half at the open
bid 2012 Jan. $24 call @ $3.60 (+68.2%)
10/10 Take some $$ off the table. Sell 1/2 at the open tomorrow
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


iShares Transportation ETF - IYT - close: 83.08 change: -1.11

Stop Loss: 81.30
Target(s): 90.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
10/19 update: There was no follow through higher on yesterday's rally in the transports. The IYT actually gapped open lower at $83.88 and ended the session down -1.3%. Nimble traders might want to consider buying a dip near its 10-dma around $81.85. Currently the newsletter is suggesting a breakout trigger at $85.20 to buy calls.

Earlier Comments:
The 100-dma and exponential 200-dma could be potential resistance but we're aiming for $90.00. Readers will want to keep our position size small since the transports are short-term overbought given the huge bounce from its October lows.

Trigger @ $85.25 (small positions)

- Suggested Positions -

buy the NOV $87 call (IYT1119K87)

Entry on October xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 662 thousand
Listed on October 18, 2011


PowerShares QQQ ETF - QQQ - close: 56.87 change: -1.12

Stop Loss: 56.45
Target(s): 59.25
Current Option Gain/Loss: -18.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/19 update: We were expecting a bigger gap down at the open. The QQQ gapped down at $57.71 and spent most of the day churning sideways. Then stocks rolled over late in the day following the Beige Book report. Readers can choose to buy this dip or wait for a dip near the simple 200-dma as their entry point. Bear in mind our stop loss is at $86.45. Our exit target is $59.25.

(Small Positions)

- Suggested Positions -

buy the NOV $58 call (QQQ1119K58) Entry $1.74

Entry on October 19 at $57.71
Earnings Date --/--/--
Average Daily Volume = 87 million
Listed on October 18, 2011


Semiconductor ETF - SMH - close: 30.24 change: -0.26

Stop Loss: 29.45
Target(s): 33.45
Current Option Gain/Loss: -41.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/19 update: I was definitely expecting more strength out of the semiconductor stocks today, especially after INTC's bullish earnings report last night. Yet the SMH barely moved and traded in the $30.60-30.20 zone most of the session. The early afternoon spike toward $30.80 was just enough to hit our trigger and open positions. Lack of follow through on the move higher is a concern. Readers may want to wait for a new bounce or a new move past $30.80 before initiating positions.

Earlier Comments:
The $32.00 level could be resistance but we're aiming for $33.45. I would keep our position size small.

(small positions)

- Suggested Positions -

Long NOV $31.50 call (SMH1119K31.5) Entry $0.63

Entry on October 19 at $30.75
Earnings Date --/--/--
Average Daily Volume = 12.7 million
Listed on October 18, 2011


SPX Corp. - SPW - close: 51.67 change: +0.02

Stop Loss: 49.15
Target(s): 57.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/19 update: Neither SPW or the S&P 500 index opened higher today. Our trade is still not open. We are going to try again. The plan is to buy calls if both SPW and the S&P 500 index both open positive tomorrow morning. More conservative traders may want to use a trigger at $53.55 as their entry point instead.

Earlier Comments:
This is an aggressive trade so we want to keep our position size small. If triggered our target is $57.75. FYI: The Point & Figure chart for SPW is bullish with a $78 target.

*See Entry Details Above* (Small Positions)

- Suggested Positions -

buy the NOV $55 call (SPW1119K55)

10/19 Trade still not open. Try again.
10/18 New entry point on this bounce. See entry details above
10/17 Trade not open. Remove entry point for 24 hours, then re-evaluate.

Entry on October xx at $ xx.xx
Earnings Date 11/02/11 (unconfirmed)
Average Daily Volume = 701 thousand
Listed on October 15, 2011


PUT Play Updates

Currently we do not have any active put trades.


CLOSED BEARISH PLAYS

Edwards Lifesciences - EW - close: 67.79 change: -2.37

Stop Loss: 72.30
Target(s): 66.00
Current Option Gain/Loss: +41.4%
Time Frame: exit prior to earnings on Oct. 19th
New Positions: see below

Comments:
10/19 update: The market and shares of EW cooperated with us today. Shares saw an early spike to $71.50 but the stock reversed and eventually posted a -3.3% loss. It was our plan to exit positions at the closing bell to avoid holding over earnings.

FYI: EW missed estimates by a penny and lowered its 2011 guidance.

- Suggested Positions -

NOV $65 PUT (EW1119W65) Entry $2.05, exit $2.90 (+41.4%)

10/19 planned exit.
10/18 plan to exit tomorrow at the close.
10/17 new stop loss @ 72.30
10/15 plan to exit before earnings on Oct. 19th.
10/13 EW gapped open lower at $70.29

chart:

Entry on October 13 at $70.29
Earnings Date 10/19/11 (confirmed)
Average Daily Volume = 1.3 million
Listed on October 12, 2011