Editor's Note:

Our bullish plays on GS and IYT have hit our profit targets.

Unfortunately the stock market's gap open higher this morning had a very negative impact on several trades we were trying to open. ANF, COST, FXI ROP and TSCO are all opened with this morning's gap higher.

Now after today's +3.4% surge in the S&P 500 and a +19.5% rally off the S&P500's October low, we are worried that stocks are overbought.

-James

Current Portfolio:


CALL Play Updates

Abercrombie & Fitch - ANF - close: 76.21 change: +4.00

Stop Loss: 71.90
Target(s): 77.50
Current Option Gain/Loss: +21.4%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
10/27 update: ANF was a strong performer today. Unfortunately a large chunk of today's +5.5% gain was at the gap open this morning. Our trade has been opened this morning so it's not the greatest entry point. There is a chance that ANF could try and fill the gap, which means a dip back toward $72.25. I am raising our stop loss up to $71.90. I am not suggesting new positions at this time.

We are adjusting our exit target to $77.50.

Earlier Comments:
I am labeling this as an aggressive trade. ANF can be a volatile stock and we have a wide stop loss. Please note we do not want to hold over the mid November earnings report.

FYI: Traders will want to take note of the fact that the most recent data listed short interest at 8% of the 85.8 million share float. Plus, the Point & Figure chart for ANF is bullish with a $98 target.

- Suggested Positions -

Long NOV $75 call (ANF1119K75) Entry $3.50

10/27 new stop loss @ 71.90, adjusted target to $77.50
10/27 Trade open on gap higher at $74.95
10/26 Adjusted entry point strategy. Buy calls tomorrow if ANF and S&P 500 index open positive.

Entry on October 27 at $74.95
Earnings Date 11/16/11 (unconfirmed)
Average Daily Volume = 2.1 million
Listed on October 24, 2011


Bed Bath & Beyond Inc. - BBBY - close: 62.77 change: +1.83

Stop Loss: 59.75
Target(s): 64.75
Current Option Gain/Loss: +17.3%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
10/27 update: BBBY gapped higher to open at $62.35 and then closed at a new high with a +3.0% gain today. We are raising our stop loss up to $59.75. I am not suggesting new positions at this time.

*Small Positions*- Suggested Positions -

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

10/27 new stop loss @ 59.75

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: 85.22 change: +1.49

Stop Loss: 81.80
Target(s): 97.50
Current Option Gain/Loss: Nov$85 call: + 5.9% & Jan $90 call: +15.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
10/27 update: The gap open this morning triggered our bullish trade on COST. Shares opened at $85.00 and closed at $85.22, it's not exactly a stellar performance for our call play tonight. I am somewhat surprised that COST only gained +1.7% versus +3.4% in the S&P 500.

At this point I would wait for a dip near $84.00 before considering new positions.

Earlier Comments:
Our multi-week exit target is $97.50. Cautious traders will want to consider an exit near $90 or $94 instead. Keep positions small.

(small positions)- Suggested Positions -

Long NOV $85 call (COST1119K85) Entry $1.52

- or -

Long 2012 Jan $90 call (COST1221A90) Entry $1.01

10/27 trade opened on gap higher at $85.00
10/26 Adjusted entry point strategy. Buy calls tomorrow if COST and S&P 500 index open positive. New stop loss at $81.80.

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


iShares China 25 index ETF - FXI - close: 38.21 change: +2.08

Stop Loss: 36.90
Target(s): 39.50
Current Option Gain/Loss: +14.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/27 update: Sometimes the market will not cooperate. We were correct on the direction of the FXI going higher. Unfortunately, we couldn't quite get the entry point down. The gap open nature of the FXI ETF has produced an undesirable entry point for us. Shares gapped open at $37.72 (our entry). Our exit target is $39.50. More conservative traders may want to exit now just to avoid a loss. Shares of the FXI are now short-term overbought.

There is a good chance that the Chinese market will rally in response to Wall Street's big gains today. That means the FXI could gap higher again tomorrow.

I am not suggesting new positions. We will raise our stop loss to $36.90.

- Suggested Positions -

Long NOV $37 call (FXI1119K37) Entry $1.82

10/27 new stop loss @ 36.90
10/27 FXI gaps higher at $37.72, our new entry
10/26 adjusted our entry point strategy. New stop loss @ 33.90

Entry on October xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 30 million
Listed on October 24, 2011


Rockwell Automation - ROK - close: 70.35 change: +4.96

Stop Loss: 67.90
Target(s): 71.75
Current Option Gain/Loss: +78.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/27 update: ROK produced a big gain today. Shares gapped open higher at $68.22 and rallied to $71.38 intraday. Our exit target is $71.75. More conservative traders may want to seriously consider an early exit right now! I am not suggesting new positions. We are raising our stop loss to $67.90.

Earlier Comments:
Let's keep our position size small. Our exit target is $71.75.

(Small Positions)- Suggested Positions -

Long NOV $70 call (ROK1119K70) Entry $1.65

10/27 Readers may want to take profits now.
10/27 new stop loss @ 67.90
10/26 new stop loss @ 62.90
10/24 new stop loss @ 62.40

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


Roper Industries - ROP - close: 82.43 change: +2.89

Stop Loss: 79.45
Target(s): 84.90
Current Option Gain/Loss: + 6.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/27 update: Our new call play on ROP is now open. Unfortunately the gap open this morning at $82.03 is not exactly the most attractive entry point. Our plan was to buy calls when ROP traded at $80.25. This morning's gap higher takes a big chunk out of our potential gains.

At this point I am concerned that ROP will fill the gap with a dip back toward $80.00. If you're looking for an entry point then wait for a dip or a bounce at $80. We are raising our stop loss to $79.45.

- Suggested Positions -

Long NOV $80 call (ROP1119K80) Entry $3.30

10/27 new stop loss @ 79.45
10/27 gap higher at $82.03 is our entry point. Plan was to buy calls at $80.25.

Entry on October 27 at $82.03
Earnings Date 01/31/12 (unconfirmed)
Average Daily Volume = 740 thousand
Listed on October 26, 2011


SPX Corp. - SPW - close: 56.46 change: +3.52

Stop Loss: 52.75
Target(s): 57.75
Current Option Gain/Loss: +88.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/27 update: SPW outperformed the major indices with a +6.6% gain. The stock gapped open higher at $54.99 and rallied to $57.54 intraday. Our exit target is $57.75. More conservative traders will want to seriously consider an early exit now! I am not suggesting new positions. We will raise our stop loss to $52.75.

Earlier Comments:
This is an aggressive trade so we want to keep our position size small.

(Small Positions)- Suggested Positions -

Long NOV $55 call (SPW1119K55) Entry $1.80

10/27 Readers may want to take profits early right now
10/27 new stop loss @ 52.75
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


Tractor Supply Co - TSCO - close: 73.65 change: +1.24

Stop Loss: 69.90
Target(s): 79.00
Current Option Gain/Loss: Nov$75c: -14.2% & Jan$80c: -15.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/27 update: The gap open in TSCO this morning had a negative impact on our entry point. The stock opened at $74.36 (up from yesterday's close at $72.41). However, if you look at the intraday chart it would appear that TSCO actually opened at $73.00 and then spiked to $74.51, the high for the day. We have to use the "official" opening price as our entry point.

I remain bullish on TSCO but I would expect some profit taking. Wait for a dip or a bounce near $72.00 before launching new positions.

(small positions)- Suggested Positions -

Long NOV $75 call (TSCO1119K75) Entry $1.75

- or -

Long Jan $80 call (TSCO1221A80) Entry $2.30

10/27 TSCO gapped open higher at $74.36 (up from $72.41)

Entry on October 27 at $74.36
Earnings Date 10/19/11
Average Daily Volume = 904 thousand
Listed on October 26, 2011


PUT Play Updates

Currently we do not have any active put trades.


Market Neutral Play Updates

iShares Russell 2000 ETF - IWM - close: 76.42 change: +3.83

Stop Loss: n/a
Target(s): To Be Determined
Current Option Gain/Loss: +29.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/27 update: Small caps continue to outperform. The IWM gapped open higher at $75.29 and rallied to $76.97 intraday.

We are concerned that stocks are overbought at current levels. Therefore we are suggesting readers exit this strangle position at the open tomorrow morning. Currently the option strangle is up +29.8%.

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: 5.91 (+29.8%)

Out-of-the-Money Call option:
Long NOV $72 call (IWM1119K72) Entry $2.30, current bid $5.44

- and -

Out-of-the-Money Put option:
Long NOV $68 put (IWM1119W68) Entry $2.25, current bid $0.47

10/27 Strangle is up +29.8%, Plan to exit at the open tomorrow.

Entry on October 21 at $70.57
Earnings Date --/--/--
Average Daily Volume = 89 million
Listed on October 20, 2011


CLOSED BULLISH PLAYS

Goldman Sachs - GS - close: 106.33 change: +5.89

Stop Loss: 99.40
Target(s): 114.00
Current Option Gain/Loss: +245.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
10/27 update: Target achieved.
Financial stocks were some of the market's best performers today as investors reacted to the news out of Europe. Shares of GS gapped open higher at $110.33 and then rallied to $117.53 intraday. Our target to exit was $114.00.

FYI: The Nov. $110 call would have been trading with a bid/ask of $6.35/6.75 with GS at $114.00. The high today was $9.50 for this option. It closed with a bid at $8.55.

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 -

NOV $110 call (GS1119K110) Entry $1.84, exit $6.35 (+245.1%)

10/27 target hit at $114.00
10/26 new stop loss @ 99.40

chart:

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: 89.86 change: +3.72

Stop Loss: 82.95
Target(s): 90.00
Current Option Gain/Loss: +58.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/27 update: Target achieved. The IYT transportation ETF surged toward technical resistance at its simple 200-dma. The high today was $90.69. Our target to exit was $90.00. Unfortunately the bid/ask spread is pretty wide ($1.30) or these gains would have been bigger.

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 -

NOV $87 call (IYT1119K87) Entry $2.15, exit $3.40 (+58.1%)

10/27 target hit at $90.00
10/26 new stop loss @ 82.95
10/22 new stop loss @ 82.45
10/21 Gap higher entry @ 85.33

chart:

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