Editor's Note:

Stocks have delivered an incredible month for the bulls in October. Our short-term concern should be focused on a pull back with the market overbought and due for some profit taking.

We are electing to exit early in our ANF and ROK trades. SPW hit our exit target. Plus, the plan was to exit our IWM strangle on Friday morning.

-James

Current Portfolio:


CALL Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 61.15 change: -1.62

Stop Loss: 59.75
Target(s): 64.75
Current Option Gain/Loss: -42.0%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
10/29 update: BBBY underperformed the market on Friday with a -2.5% decline thanks to some bearish analyst comments. Our November calls were hammered lower on the drop. The stock delivered a choppy week but shares still have a bullish trend of higher lows and higher highs. Technically Friday's dip looks like a new entry point but I am worried the stock market's major indices are overbought and due for a pull back. 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

chart:

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: -13.1% & Jan $90 call: + 3.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
10/29 update: Traders bought the dip at noon on Friday with COST near its rising 10-dma. The afternoon bounce almost looks like a new bullish entry point but I am concerned the major indices are overbought and due for a pull back. I am not suggesting new positions at this time.

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.

chart:

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: 37.79 change: -0.42

Stop Loss: 36.90
Target(s): 39.50
Current Option Gain/Loss: + 8.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/29 update: The trading action in the FXI on Friday is surprising. As we expected the Chinese markets rallied higher on Friday in reaction to the U.S. market's big move on Thursday. Yet shares of the FXI did not gap open higher on Friday like we expected. Instead the ETF gapped open lower and traded sideways in a narrow range.

I am repeating my earlier comments that given our undesirable entry point more conservative traders may want to just go ahead and exit early now. I am not suggesting new positions at this time. The FXI still looks short-term overbought.

- 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

chart:

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


Roper Industries - ROP - close: 82.89 change: +0.46

Stop Loss: 79.45
Target(s): 84.90
Current Option Gain/Loss: +12.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/29 update: ROP spent Friday in a very narrow range but shares still managed to outperform the market with a +0.55% gain. I remain concerned that the market and ROP are short-term overbought. There is a good chance that ROP will fill the gap and dip back toward support near $80.00 and its 200-dma. I would wait for a dip near $80 before considering new bullish positions.

- Suggested Positions -

Long NOV $80 call (ROP1119K80) Entry $3.30

10/29 wait for a dip near $80 before considering new positions.
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.

chart:

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


Tractor Supply Co - TSCO - close: 71.19 change: -2.46

Stop Loss: 69.90
Target(s): 79.00
Current Option Gain/Loss: Nov$75c: -60.0% & Jan$80c: -40.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/29 update: There is no explanation for TSCO's relative weakness on Friday. The stock gapped open lower and fell to a -3.3% loss. Technically this dip toward support near $70 could be used as a new bullish entry point. However, I am concerned that the major indices are overbought and due for a correction. Readers may want to hesitate on opening new bullish 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)

chart:

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

Dollar Tree - DLTR - close: 78.87 change: -0.79

Stop Loss: 82.65
Target(s): 75.10
Current Option Gain/Loss: +3.8%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
10/29 update: So far so good. DLTR opened at $79.46, rallied to $80.25 only to reverse lower. Shares hit new three-week lows intraday on Friday. I would still consider new bearish positions now.

Earlier Comments:
More conservative traders may want to use a trigger under $78.45 to buy puts. Our target is $75.10. More aggressive traders could aim for the 100-dma instead.

- Suggested Positions -

Long NOV $80 put (DLTR1119W80) Entry $2.60

chart:

Entry on October 28 at $79.46
Earnings Date 11/17/11 (unconfirmed)
Average Daily Volume = 1.4 million
Listed on October 27, 2011


Shutterfly, Inc. - SFLY - close: 42.90 change: +0.33

Stop Loss: 48.05
Target(s): 35.25
Current Option Gain/Loss: -26.3%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
10/29 update: SFLY produced a small oversold bounce on Friday following Thursday's big drop. I do not see any changes from my Thursday night comments. We would still launch new put positions at current levels. More nimble traders could try and wait for a failed rally or a bounce near $45.00 as their entry point instead.

FYI: The spread on our put is a bit wide, which makes an impact on our gain/loss for this trade.

Earlier Comments:
The $40 level could offer potential support but we're aiming for $35.25 as our exit target.

- Suggested Positions -

Long NOV $40 PUT (SFLY1119W40) Entry $0.95

chart:

Entry on October 28 at $42.88
Earnings Date 10/26/11 (confirmed)
Average Daily Volume = 1.1 million
Listed on October 27, 2011


CLOSED BULLISH PLAYS

Abercrombie & Fitch - ANF - close: 76.81 change: +0.60

Stop Loss: 71.90
Target(s): 77.50
Current Option Gain/Loss: +27.1%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
10/29 update: We didn't get the best entry point on our ANF call play but it still worked out. Shares opened lower on Friday morning but rallied to $77.49 intraday. Our exit target was $77.50. I am suggesting we go ahead and close positions now with shares at $76.81. I would keep ANF on your watch list. A close over $80 would be a bullish breakout over the 2011 resistance in the $78-79 zone. ANF's all-time highs are in the $85-86 area.

- Suggested Positions -

NOV $75 call (ANF1119K75) Entry $3.50, exit $4.45 (+27.1%)

10/29 Suggested an early exit with ANF at $76.81.
10/28 ANF rallied to $77.49. our target was 77.50. It doesn't count for the newsletter but we're going to go ahead and exit early.
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.

chart:

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


Rockwell Automation - ROK - close: 71.09 change: +0.74

Stop Loss: 67.90
Target(s): 71.75
Current Option Gain/Loss: +100%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/29 update: I am suggesting we go ahead and take profits now. ROK rallied to $71.62 on Friday. Our exit target is $71.75. Instead of waiting for shares to actually hit our target I am suggesting we book profits now since the market looks overbought and due for a correction.

We can keep ROK on our watch list for a dip. The $65 area should offer some support.

Earlier Comments:
Let's keep our position size small.

(Small Positions)- Suggested Positions -

NOV $70 call (ROK1119K70) Entry $1.65, exit $3.30 (+ 100%)

10/29 go ahead and exit early to lock in a gain.
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

chart:

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: 57.40 change: +0.94

Stop Loss: 52.75
Target(s): 57.75
Current Option Gain/Loss: +122.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/29 update: Target achieved and just in time! SPW rallied to $58.14 on Friday. Our final target was hit at $57.75. We were going to have to exit soon anyway to avoid holding over earnings on November 2nd.

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, exit $4.00 (+122.2%)

10/28 target hit at $57.75
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.

chart:

Entry on October 20 at $51.80
Earnings Date 11/02/11 (confirmed)
Average Daily Volume = 701 thousand
Listed on October 15, 2011


CLOSED Market Neutral Plays

iShares Russell 2000 ETF - IWM - close: 76.03 change: -0.38

Stop Loss: n/a
Target(s): To Be Determined
Current Option Gain/Loss: +24.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/29 update: Our plan was to exit this IWM strangle at the open on Friday morning. Shares of this small cap ETF opened lower at $76.30 and then spent the rest of the session churning sideways in a tight range.

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 exit value: 5.65 (+24.1%)

Out-of-the-Money Call option:
Long NOV $72 call (IWM1119K72) Entry $2.30, exit $5.21

- and -

Out-of-the-Money Put option:
Long NOV $68 put (IWM1119W68) Entry $2.25, exit $0.44

10/28 planned exit at the open
10/27 Strangle is up +29.8%, Plan to exit at the open tomorrow.

chart:

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