Editor's Note:

Monday proved to be an ugly day for stocks with the S&P 500 plunging to 1183 intraday (-2.6%) before paring its losses. The Dow Industrials were down more than 300 points at its worst levels of the session.

We had PXD and SWK get stopped out as both stocks gapped open lower underneath our stop losses.

-James

Current Portfolio:


CALL Play Updates

Phillip Morris Intl. - PM - close: 72.00 change: -1.09

Stop Loss: 69.90
Target(s): 78.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
11/21 update: Our trade on PM isn't open yet. The stock gapped open lower on Monday morning. Traders did buy the dip near its rising 10-dma. I am suggesting we try again. The plan is to buy calls tomorrow morning if both PM and the S&P 500 open positive.

Our multi-week target is $78.50. FYI: The Point & Figure chart for PM is bullish with a $95 target.

- Suggested Positions -

buy the 2012 Jan $75 call (PM1221A75) current ask $1.09

Entry on November xx at $ xx.xx
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 7.3 million
Listed on November 19, 2011


PUT Play Updates

Deutsche Bank - DB - close: 34.70 change: -1.87

Stop Loss: 38.75
Target(s): 30.50
Current Option Gain/Loss: Dec$35p: +15.3% & Jan$30p: +26.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/21 update: Worries persist over the situation in Europe driving stocks lower. Shares of DB were actually upgraded today but the news had no impact on the stock. DB gapped open lower at $35.16 and closed at new multi-week lows with today's -5.1% drop.

Please note our new stop loss at $38.75.

Earlier Comments:
Keep position size small to limit risk. This is going to be a volatile trade. FYI: The Point & Figure chart for DB is bearish with a $30 target.

- Suggested Positions - (small positions)

Long DEC $35 PUT (DB1117x35) Entry $2.60

- or -

Long JAN $30 PUT (DB1221m30) Entry $2.09

11/21 new stop loss @ 38.75
11/12 new stop loss @ 41.55
11/11 DB gapped open higher at $39.00

Entry on November 11 at $39.00
Earnings Date 02/02/12 (unconfirmed)
Average Daily Volume = 4.3 million
Listed on November 10, 2011


Lululemon Athletica - LULU - close: 47.44 change: -1.62

Stop Loss: 51.25
Target(s): 42.50
Current Option Gain/Loss: Dec$47.50p: - 9.6% & Jan$45p: +00.0%
Time Frame: Seven Trading Days or 6 weeks
New Positions: see below

Comments:
11/21 update: A good chunk of LULU's -3.3% drop today was with the gap open lower at $47.63. We had a trigger to buy puts at $47.90 so the play was opened first thing this morning. I would still consider put positions now or you could wait for an oversold bounce back into the $48.50-50.00 zone as their entry point to buy puts.

Earlier Comments:
TIME FRAME: Traders have to make a decision about their time frame with LULU. Normally I would give this trade a few weeks to work out but LULU is due to report earnings on December 1st. As a rule the newsletter almost never holds over an earnings report. At the moment we'll plan to exit this trade on November 30th if shares don't hit our exit before then.

- Suggested Positions -

Long DEC $47.50 PUT (LULU1117X47.5) Entry $3.54

- or -

Long 2012 JAN $45 PUT (LULU1221M45) Entry $3.63

11/21 trade opened on LULU's gap down at $47.63.

Entry on November 21 at $47.63
Earnings Date 12/01/11 (confirmed)
Average Daily Volume = 2.8 million
Listed on November 19, 2011


PACCAR Inc. - PCAR - close: 38.39 change: -0.77

Stop Loss: 41.50
Target(s): 35.50
Current Option Gain/Loss: +11.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/21 update: PCAR gapped open lower at $38.30 and closed with a -1.9% drop and a breakdown under its 50-dma. Readers may want to wait for a bounce back toward the $39.50-40.00 zone before considering new positions. I am adjusting our stop loss down to $41.50.

- Suggested (Small) Positions -

Long DEC $39 PUT (PCAR1117X39) Entry $1.75

11/21 new stop loss @ 41.50

Entry on November 18 at $39.42
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 3.7 million
Listed on November 17, 2011


Western Digital Corp. - WDC - close: 26.11 change: +0.07

Stop Loss: 27.75
Target(s): 21.00
Current Option Gain/Loss: Dec$25p: -21.4% & Jan22.50p: - 1.7%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/21 update: Now I'm starting to worry. Today's widespread, violent move lower in stocks would have been the perfect excuse to sell WDC and push it below support near $25.00. Instead WDC actually managed to bounce and close in positive territory. This relative strength was probably due to a bullish upgrade and a new $35 price target placed on the stock this morning.

At this point I would wait for a breakdown under $25.00 before initiating new bearish positions.

Earlier Comments:
It is possible that the 2010 lows near $23.00 could be support but we're aiming for a drop to the $21.00-20.00 zone. We do want to keep our position size small because WDC has been very volatile the last few weeks.

- Suggested (Small) Positions -

Long DEC $25 PUT (WDC1117X25) Entry $1.49

- or -

Long JAN $22.50 PUT (WDC1221M22.5) Entry $1.13

Entry on November 18 at $26.04
Earnings Date 01/18/12 (unconfirmed)
Average Daily Volume = 6.4 million
Listed on November 17, 2011


CLOSED BULLISH PLAYS

Pioneer Nat. Res. - PXD - close: 88.58 change: -1.24

Stop Loss: 89.45
Target(s): 99.75
Current Option Gain/Loss: Dec$100c: -79.6% & Jan$100c: -50.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/21 update: Our aggressive trade on PXD has not paid off. The market's widespread weakness today pushed the stock to gap open lower at $88.59. This was underneath our stop loss at $89.45, exacerbating our loss.

The $85 level could offer some support but readers may want to wait for PXD to test support in the $81-80 zone before considering new bullish positions.

Earlier Comments:
We want to keep our position size small because PXD can be a volatile stock and we're using a wide stop loss.

(Small Positions Only) - Suggested Positions -

DEC $100 call (PXD1117L100) Entry $3.20, exit $0.65 (-79.6%)

- or -

JAN $100 call (PXD1221A100) Entry $5.50, exit $2.75 (-50.0%)

11/21 PXD gapped open lower, under our stop loss.

chart:

Entry on November 16 at $95.05
Earnings Date 02/06/12 (unconfirmed)
Average Daily Volume = 2.6 million
Listed on November 15, 2011


Stanley Black & Decker Inc. - SWK - close: 62.13 change: -1.53

Stop Loss: 63.25
Target(s): 69.50
Current Option Gain/Loss: Dec$65c: -47.2% & Jan70c: -52.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/21 update: Monday proved to be an ugly day for stocks. SWK was already testing support on Friday. This morning shares gapped open lower at $62.43, which was well below our stop loss at $63.25.

- Suggested Positions -

DEC $65 call (SWK1117L65) Entry $2.75 exit $1.45 (-47.2%)

- or -

JAN $70 call (SWK1221A70) Entry $2.20 exit $1.05 (-52.2%)

11/21 stopped out on gap down at $62.43
11/18 trade opened. SWK gapped higher at $65.09
11/17 new entry strategy. Buy calls if both SWK and S&P500 open positive tomorrow morning. New stop loss @ 63.25.

chart:

Entry on November 18 at $65.09
Earnings Date 01/26/12 (unconfirmed)
Average Daily Volume = 1.8 million
Listed on November 15, 2011