Editor's Note:

The U.S. stock market surged on Monday with widespread gains. The NASDAQ delivered a strong +2.3% gain but the small cap Russell 2000 rallied +3.3%.

Most of our trades look good except for COST, which underperformed the market today. Our COST trade is not open yet.

-James

Current Portfolio:


CALL Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 62.23 change: +0.42

Stop Loss: 58.90
Target(s): 64.75
Current Option Gain/Loss: +10.6%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
10/24 update: Hmm... BBBY underperformed the market on Monday with a +0.6% gain versus +1.2% in the S&P 500. The stock spent the session hovering sideways above $62.00. The overall trend still looks bullish but today makes me a little cautious.

*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


Costco Wholesale - COST - close: 84.48 change: -0.82

Stop Loss: 83.75
Target(s): 97.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Comments:
10/24 update: COST did not participate in the market's widespread rally on Monday. That is worrisome. Shares merely consolidated sideways in the $84-85 zone. I don't see any changes from my weekend comments. Right now our plan is to buy calls at $86.50. Nimble traders may want to consider buying calls on a dip near $82.50-82.00 instead.

Earlier Comments:
If triggered we'll use a stop loss at $83.75. Our multi-week exit target is $97.50. Cautious traders will want to consider an exit near $90 or $94 instead. Keep positions small.

Trigger @ $86.50 (small positions)

- Suggested Positions -

buy the NOV $85 call (COST1119K85)

- or -

buy the 2012 Jan $90 call (COST1221A90)

Entry on October xx at $ xx.xx
Earnings Date 12/07/11 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on October 22, 2011


Goldman Sachs - GS - close: 103.98 change: +1.89

Stop Loss: 97.95
Target(s): 114.00
Current Option Gain/Loss: - 3.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
10/24 update: Our new trade on GS is open. The stock gapped higher at $102.65 and almost $105 intraday before setting with a +1.8% gain. I would still consider new positions now or you could wait for a breakout past resistance at $105.00 instead.

Earlier Comments:
We want to keep our position size small to limit our risk. Our target is $114.00. More conservative traders may want to exit near $110 instead.

(Small Positions) - Suggested Positions -

Long NOV $110 call (GS1119K110) Entry $1.84

Entry on October 24 at $102.65
Earnings Date 10/18/11 (confirmed)
Average Daily Volume = 8.2 million
Listed on October 22, 2011


iShares Transportation ETF - IYT - close: 87.68 change: +1.46

Stop Loss: 82.45
Target(s): 90.00
Current Option Gain/Loss: +39.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/24 update: The IYT continues to rally although shares of the transport ETF spent most of Monday churning sideways in the $87.50-88.00 zone. The close over its 100-dma and exponential 200-dma today is bullish.

Earlier Comments:
Readers will want to keep our position size small since the transports are short-term overbought given the huge bounce from its October lows.

(small positions)

- Suggested Positions -

Long NOV $87 call (IYT1119K87) Entry $2.15

10/22 new stop loss @ 82.45
10/21 Gap higher entry @ 85.33

Entry on October 21 at $85.33
Earnings Date --/--/--
Average Daily Volume = 662 thousand
Listed on October 18, 2011


Rockwell Automation - ROK - close: 68.40 change: +1.86

Stop Loss: 61.90
Target(s): 71.75
Current Option Gain/Loss: +36.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/24 update: Our new trade on ROK is open. The stock and the S&P 500 opened higher. Shares rallied to their 100-dma and closed up +2.79%. I would not chase it here. The $66-65 levels should be short-term support. FYI: We were fortunate the Nov. $70 call opened lower at $1.65.

Earlier Comments:
Let's keep our position size small. Our exit target is $71.75. FYI: The Point & Figure chart for ROK is bullish with a $91 target.

(Small Positions)- Suggested Positions -

Long NOV $70 call (ROK1119K70) Entry $1.65

Entry on October 24 at $66.62
Earnings Date 11/08/11 (confirmed)
Average Daily Volume = 1.7 million
Listed on October 22, 2011


SPX Corp. - SPW - close: 55.42 change: +2.63

Stop Loss: 51.75
Target(s): 57.75
Current Option Gain/Loss: +63.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/24 update: It was a big day for SPW. The stock finally broke through recent resistance in the $53-54 area and surged to a +4.9% gain today. I would not chase it here. If you're looking for an entry point consider waiting for a dip near $53.50ish.

NOTE: New stop loss at $51.75.

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

(Small Positions)- Suggested Positions -

Long NOV $55 call (SPW1119K55) Entry $1.80

10/24 new stop loss @ 51.75
10/20 trade opened at $51.80
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 20 at $51.80
Earnings Date 11/02/11 (confirmed)
Average Daily Volume = 701 thousand
Listed on October 15, 2011


PUT Play Updates

Currently we do not have any active put trades.


Market Neutral Play Updates

iShares Russell 2000 ETF - IWM - close: 73.42 change: +2.29

Stop Loss: n/a
Target(s): To Be Determined
Current Option Gain/Loss: + 3.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/24 update: Small caps were big performers today. The IWM rallied +3.2%, outpacing its big cap peers. The IWM is nearing potential resistance at its late August highs in the $73.60-73.90 zone and its 100-dma and exponential 200-dma. Don't be surprised to see a little pull back.

We are not suggesting new positions at this time.

FYI: A strangle involves buying both an out of the money call (OTM call) and an out of the money put (OTM put). The expectation is that the underlying equity (IWM in this case) will move enough to make one side profitable and cover the entire position and then some.

- Strangle Position cost: 4.55 current value: 4.73 (+3.9%)

Out-of-the-Money Call option:
Long NOV $72 call (IWM1119K72) Entry $2.30, current bid $3.48

- and -

Out-of-the-Money Put option:
Long NOV $68 put (IWM1119W68) Entry $2.25, current bid $1.25

Entry on October 21 at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 89 million
Listed on October 20, 2011