Editor's Note:

Headlines out of Europe and a big bounce for European stock markets fueled a sharp surge higher for U.S. stocks on Monday morning.

Many stocks gapped open higher, which didn't help our attempts to start new bullish positions and it wreaked havoc with our put positions.

-James

Current Portfolio:


CALL Play Updates

Edwards Lifesciences - EW - close: 63.86 change: +1.36

Stop Loss: 59.90
Target(s): 69.50
Current Option Gain/Loss: Dec$65c: -10.2% & Jan$70c: -11.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/28 update: Our trade on EW is now open. Unfortunately most of today's gains were all at the opening gap higher. EW opened at $63.97 and slowly faded to $63.86. The next level of short-term resistance EW needs to push through is the $65.00 level and its 10-dma. More conservative traders might want to use a stop loss closer to $62.00. We have a stop at $59.90.

- Suggested Positions -

Long DEC $65 call (EW1117L65) Entry $1.95

- or -

Long 2012Jan $70 call (EW1221A70) Entry $1.70

11/28 trade opened. EW gapped higher at $63.97
11/26 trade still not open. Adjusting stop loss to $59.90
11/23 still not open
11/22 not open yet

Entry on November 28 at $63.97
Earnings Date 02/02/12 (unconfirmed)
Average Daily Volume = 1.2 million
Listed on November 21, 2011


Family Dollar Stores - FDO - close: 56.48 change: +0.68

Stop Loss: 53.75
Target(s): 59.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
11/28 update: FDO bounced toward its trend of lower highs and then faded lower. Shares settled with a +1.2% gain, which underperformed the major indices. I don't see any changes from my prior comments.

Currently we have a buy-the-dip trigger to buy calls at $54.50. Readers might want to consider an alternative entry point on a rally past $58.50 instead.

Earlier Comments:
We want to keep our position size small because the spreads on the options below are getting wide, making this trade more risky.

buy the dip Trigger @ 54.50 (small positions)

- Suggested Positions -

buy the DEC $57.50 call (FDO1117L57.5)

- or -

buy the JAN $60 call (FDO1221A60)

11/26 new strategy. buy a dip at $54.50, stop loss @ 53.75. Keep positions small because option spreads are wide.
11/22 not open yet

Entry on November xx at $ xx.xx
Earnings Date 01/04/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 21, 2011


JB Hunt Transport Services - JBHT - close: 43.78 change: +1.03

Stop Loss: 41.99
Target(s): 48.25
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Comments:
11/28 update: The Dow Jones Transportation average produced a strong bounce with a +3.5% gain. Shares of JBHT only settled with a +2.4% gain. The stock rallied to $44.15 this morning before paring its gains. Our strategy has not changed.

JBHT has resistance near $44.00. I am suggesting a trigger to open bullish positions at $44.35. If triggered our multi-week target is $48.25. JBHT doesn't move super fast so give yourself time for the trade to work. FYI: The Point & Figure chart for JBHT is bullish with a $63 target.

Trigger @ 44.35

- Suggested Positions -

buy the 2012JAN $45 call (JBHT1221A45)

Entry on November xx at $ xx.xx
Earnings Date 01/30/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 22, 2011


O'Reilly Automotive - ORLY - close: 75.73 change: +0.22

Stop Loss: 73.85
Target(s): 82.50
Current Option Gain/Loss: Dec$75c: -33.9% & Jan$80c: -40.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/28 update: Warning! The action in ORLY is not very encouraging. The stock gapped open higher at $76.96 and quickly reversed. ORLY gave back almost all of its gains to settle up +0.2% versus a +3.5% move in the NASDAQ. At this point I would wait for a new rally past $76.25 before considering new bullish positions.

Earlier Comments:
Our target is $82.50 but more conservative traders may want to exit in the $79.50-80.00 zone instead. FYI: The Point & Figure chart for ORLY is bullish with a $103 target.

- Suggested Positions -

Long DEC $75 call (ORLY1117L75) Entry $2.80

- or -

Long JAN $80 call (ORLY1221A80) Entry $1.50*

11/28/11 ORLY gapped open higher at $76.96, which was above our trigger to buy calls at $76.15.
*Jan $80 call did not trade today. Entry price is an estimate.

Entry on November 28 at $76.96
Earnings Date 02/16/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 26, 2011


Phillip Morris Intl. - PM - close: 73.09 change: +1.78

Stop Loss: 69.49
Target(s): 78.50
Current Option Gain/Loss: + 6.2%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
11/28 update: PM was showing some strength today. The stock added +2.5% and closed near its recent highs. PM could see new all-time highs again soon.

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

- Suggested Positions -

Long 2012 Jan $75 call (PM1221A75) Entry $1.12

11/23 adjusted stop loss to $69.49
11/22 trade opened. PM opened at $72.11

Entry on November 22 at $72.11
Earnings Date 02/09/12 (unconfirmed)
Average Daily Volume = 7.3 million
Listed on November 19, 2011


PUT Play Updates

Alliance Resource Partners - ARLP - close: 70.75 chg: +2.08

Stop Loss: 72.55
Target(s): 60.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
11/28 update: The stock market's big move higher on Monday lifted ARLP to a +3.0% gain. This looks like a simple oversold bounce. There is no change from my weekend comments.

I am suggesting we use a trigger at $68.45 to buy puts and we'll use a stop loss at $72.55. It's a bit wide for a stop but ARLP can be a volatile stock. Our target is $60.50. FYI: The Point & Figure chart for ARLP is bearish with a $62 target.

NOTE: I would feel more comfortable buying the January puts to have more time but the spreads are too wide to trade. We want to keep our position size small to limit our risk.

Trigger @ 68.45 (small positions)

- Suggested Positions -

buy the DEC $65 PUT (ARLP1117X65)

Entry on November xx at $ xx.xx
Earnings Date 01/30/12 (unconfirmed)
Average Daily Volume = 45 thousand
Listed on November 26, 2011


Deutsche Bank - DB - close: 35.18 change: +2.84

Stop Loss: 36.55
Target(s): 30.50
Current Option Gain/Loss: Dec$35p: - 3.8% & Jan$30p: +12.4%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/28 update: Wow! Either the market's timing or my timing couldn't be better (or worse). After a -17.0% drop we decided over the weekend to take some money off the table and sell half of our puts at the open on Monday morning. What happens next? The market explodes higher and DB gaps higher at $35.59 and settles with a +8.7% gain. This was due in large part to news that EU leaders were considering radical steps to reign in the region's financial instability.

The $36.00 level and the 50-dma should offer some overhead resistance. I am not suggesting new positions at this time.

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

11/28 planned exit to sell half of our puts at the open.
Dec $35 put @ $2.40 (- 7.6%)
Jan $30 put @ $2.00 (- 4.3%)
Both of these puts positions were up about +60% at Friday's close
11/26 new stop loss @ 36.55
11/26 Sell half at the open on Monday morning to lock in a gain.
11/23 new stop loss @ 37.55
11/23 more conservative traders may want to take profits now. The Dec $35 put (+61.5%) and the Jan $30 put (+62.6%)
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


PACCAR Inc. - PCAR - close: 38.52 change: +1.24

Stop Loss: 40.25
Target(s): 35.50
Current Option Gain/Loss: - 8.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/28 update: The market's oversold bounce this morning pushed PCAR to gap higher at $38.60. Shares spiked to their 50-dma near $39.20 before fading lower and closing up +3.3%. If we see PCAR fail under $40 or the $39 level again tomorrow then readers can use it as a new entry point for bearish positions.

- Suggested (Small) Positions -

Long DEC $39 PUT (PCAR1117X39) Entry $1.75

11/23 new stop loss @ 40.25
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


United Continental Holdings - UAL - close: 16.58 change: +0.68

Stop Loss: 17.25
Target(s): 12.75
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
11/28 update: Our plan was to open bearish put positions at the opening bell this morning. Yet shares of UAL actually gapped above our stop loss. We had a stop at $16.55 and the stock opened at $16.75 so our trade did not open. We're still bearish on UAL. I am suggesting we try again.

We'll open bearish put positions at the open tomorrow morning and list a stop loss at $17.25. Our target is $12.75 but more conservative trades may want to exit on a decline near $14.00, which might offer some support.

- Suggested Positions -

buy the DEC $15 put (UAL1117x15) current ask $0.29

- or -

buy the JAN $14 put (UAL1221M14) current ask $0.49

11/28/11 Our initial entry strategy did not work. UAL gapped open above our stop loss. We will try again. New stop loss at $17.25.

Entry on November xx at $ xx.xx
Earnings Date 01/26/12 (unconfirmed)
Average Daily Volume = 5.0 million
Listed on November 26, 2011


Western Digital Corp. - WDC - close: 26.56 change: +1.56

Stop Loss: 27.05
Target(s): 21.00
Current Option Gain/Loss: Dec$25p: + 3.3% & Jan22.50p: +20.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/28 update: Today looks like another short covering rally with the super sharp spike higher this morning. Shares couldn't quite get past resistance near $27.00 and its 50-dma. We are at risk should the rally continue tomorrow. I am not suggesting new positions at this time.

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

11/26 new stop loss @ 27.05

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 BEARISH PLAYS

Lululemon Athletica - LULU - close: 48.93 change: +2.67

Stop Loss: 50.25
Target(s): 42.50
Current Option Gain/Loss: Dec$47.50p: -40.6% & Jan$45p: -21.4%
Time Frame: Seven Trading Days or 6 weeks
New Positions: see below

Comments:
11/28 update: Our very small (+10%) gains in these puts evaporated at the open this morning thanks to the market's super surge higher. Shares of LULU gapped open higher at $49.00 but failed at resistance near $50.00 and its 200-dma. Over the weekend we had decided to exit these positions at the open on Monday morning.

- Suggested Positions -

DEC $47.50 PUT (LULU1117X47.5) Entry $3.54 exit $2.10 (-40.6%)

- or -

2012 JAN $45 PUT (LULU1221M45) Entry $3.63 exit $2.85 (-21.4%)

11/28 planned exit at the open. LULU gaps higher at $49.00
11/26 plan to exit on Monday morning at the open
11/23 new stop loss @ 50.25
11/23 LULU is not falling very fast. Readers may want to consider an early exit now.
11/21 trade opened on LULU's gap down at $47.63.

chart:

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