Editor's Note:

We only have twelve days left until Christmas. On this first day of Christmas the market gave to us a widespread decline!

BA and VAR were triggered. We have removed CAT and CBE with these trades unopened. FDO and WSO were stopped out. FTI was triggered this morning only to be stopped out on the market's sharp afternoon decline.

-James

Current Portfolio:


CALL Play Updates

Boeing Co. - BA - close: 70.90 change: +0.00

Stop Loss: 69.25
Target(s): 77.00
Current Option Gain/Loss: -12.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: Our new trade on BA is open. Both the S&P500 and BA opened positive this morning. BA actually gapped open at $71.67 but the rally failed at $72.65 near its December highs. Shares bounced off another test of the simple 10-dma and closed unchanged on the session.

The market's sharp slide lower this afternoon is a bit foreboding. I am not suggesting new positions in BA at this time.

Earlier Comments:
There is potential resistance at $75.00 and more conservative traders may want to exit there. I am aiming for $77.00. FYI: The Point & Figure chart for BA is bullish with a $79 target.

- Suggested Positions -

Long 2012Jan $75 call (BA1221A75) entry $1.08

12/13/11 trade opened
12/12/11 adjusted stop loss to $69.25
12/12/11 trade did not open, try again.

Entry on December 13 at $71.67
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 6.2 million
Listed on December 10, 2011


NetApp, Inc. - NTAP - close: 37.92 change: +0.79

Stop Loss: 36.25
Target(s): 39.50
Current Option Gain/Loss: +43.4%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/13 update: NTAP displayed some relative strength. Shares rallied to $38.97 intraday before paring its gains. The stock managed to end the session up +2.1%. The market looks vulnerable here. Readers may want to take profits now.

Earlier Comments:
I do consider a more aggressive trade. We want to keep our position size small to limit risk. FYI: Readers should note that there is a risk that NTAP might make an acquisition soon. There are rumors floating around that NTAP could buy Quantum (QTM) or CommVault (CVLT) in an effort to better compete with rival EMC. If NTAP does make a bid for either company typically shares of the buyer go down while shares of the target go up.

- Suggested Positions - (small positions)

Long JAN $35 call (NTAP1221A35) Entry $2.51

12/10/11 new stop loss @ 36.25
12/08/11 new stop loss @ 35.75, more conservative traders may want to exit immediately.
12/03/11 new stop loss @ 34.95

Entry on November 29 at $35.82
Earnings Date 02/16/12 (unconfirmed)
Average Daily Volume = 9.2 million
Listed on November 28, 2011


O'Reilly Automotive - ORLY - close: 78.91 change: -2.02

Stop Loss: 77.85
Target(s): 84.00
Current Option Gain/Loss:(Dec$75c: +61.4%)& Jan$80c: + 6.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: Warning! ORLY underperformed today with a -2.5% decline. The three-day move looks like a bearish revresal pattern. Readers may want to exit early immediately. Our January calls have gone from +80% to +6.6% in one day. I am not suggesting new positions at this time.

- Suggested Positions -

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

12/13/11 caution! readers may want to exit immediately
12/12/11 new stop loss @ 77.85
12/10/11 new stop loss @ 76.90
12/08/11 new stop loss @ 76.40, more conservative traders may want to exit early.
12/06/11 Planned exit Dec. calls at the open. The Bid on the Dec. $75 call was $4.52 (+61.4%)
12/05/11 Strategy change: Exit the December calls tomorrow at the open. Move the exit target for the January calls from $82.50 to $84.00.
12/03/11 new stop loss @ 74.90
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: 75.51 change: +0.36

Stop Loss: 73.75
Target(s): 78.50
Current Option Gain/Loss: + 54.4%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
12/13 update: PM displayed some relative strength but shares still pared its gain with a sharp pull back this afternoon. I am not suggesting new positions at this time.

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

12/05 Call is up +100%, readers may want to exit now!
12/03 new stop loss @ 73.75
11/30 new stop loss @ 71.40
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


Boston Beer Co. Inc. - SAM - close: 101.67 change: +0.35

Stop Loss: 98.75
Target(s): 109.50
Current Option Gain/Loss: -43.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: Honestly I am a little bit surprised to see SAM showing relative strength today. The stock ended the session with a minor gain on a day the stock essentially drifted sideways. I am not suggesting new positions at this time.

Earlier Comments:
Our exit target is $109.50. More aggressive traders may want to aim higher. FYI: The Point & Figure chart for SAM is bullish with a $117 target. NOTE: The most recent data listed short interest at 20% of SAM's extremely small 8.3 million-share float. That's definitely a recipe for a short squeeze.

(small positions) - Suggested Positions -

Long JAN $105 call (SAM1221A105) Entry $2.05

12/03/11 new stop loss @ 98.75
12/02/11 trade triggered at $102.00

Entry on December 02 at $102.00
Earnings Date 03/08/12 (unconfirmed)
Average Daily Volume = 72.3 thousand
Listed on December 01, 2011


Varian Medical Sys. - VAR - close: 64.02 change: -0.73

Stop Loss: 62.80
Target(s): 69.75
Current Option Gain/Loss: -30.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: It was not a good day for the bulls. The market's early morning strength faded into losses. VAR managed to breakout to new highs and hit $65.29 before rolling over. That was enough to trigger this new call play (trigger 65.25). I am not suggesting new positions at this time. Readers may want to wait for VAR to close over $65.25 before considering new positions.

- Suggested Positions -

Long JAN $65 call (VAR1221A65) entry $2.65

Entry on December 13 at $65.25
Earnings Date 01/25/12 (unconfirmed)
Average Daily Volume = 1.1 million
Listed on December 12, 2011


PUT Play Updates

Check Point Software - CHKP - close: 52.92 change: -0.64

Stop Loss: 55.05
Target(s): 48.00
Current Option Gain/Loss: -16.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: CHKP is still holding support near the $52.80 level. I find this action dangerous. I am not suggesting new positions at this time. We are adjusting our stop loss down to $55.05.

Earlier Comments:
There is potential support near $51.00 but we're aiming for the $48.00 level. More aggressive traders could aim lower. FYI: The Point & Figure chart for CHKP is bearish with a $46 target.

(Small Positions) - Suggested Positions -

Long Jan $50 PUT (CHKP1221M50) Entry $1.20

12/13/11 new stop loss @ 55.05

Entry on December 09 at $53.29
Earnings Date 01/30/12 (unconfirmed)
Average Daily Volume = 1.7 million
Listed on December 08, 2011


Juniper Networks - JNPR - close: 18.99 change: -0.84

Stop Loss: 20.75
Target(s): 16.75
Current Option Gain/Loss: + 10.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: JNPR displayed some relative weakness with a -4.2% decline. More conservative traders might want to consider inching down their stop loss. I am not suggesting new positions at this time.

(small positions) - Suggested Positions -

Long 2012Jan $17.50 PUT (JNPR1221M17.5) entry $0.57

12/12/11 JNPR gapped open lower at $19.58, opening our trade. Stop loss at $20.75

Entry on December 12 at $19.58
Earnings Date 01/24/12 (unconfirmed)
Average Daily Volume = 8.8 million
Listed on December 10, 2011


SPDR S&P 500 ETF - SPY - close: 123.05 change: -1.16

Stop Loss: 127.55
Target(s): 120.50
Current Option Gain/Loss: + 8.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: The early morning rally in the SPY reversed and shares dropped to their 50-dma before settling with a -0.9% decline. I am not suggesting new positions at this time.

Earlier Comments:
We want to keep our position size small to limit our risk.

- Suggested Positions -

Long 2012Jan $120 PUT (SPY1221M120) Entry $2.67

12/02/11 trade opened at $126.12 (gap higher), trigger was 126.00

Entry on December 02 at $126.12
Earnings Date --/--/--
Average Daily Volume = 224 million
Listed on November 30, 2011


Thermo Fisher Scientific - TMO - close: 44.69 change: -0.44

Stop Loss: 48.01
Target(s): 42.75
Current Option Gain/Loss: Dec$45p: + 44.4% & Jan$45P: +35.7%
Time Frame: 2 to 4 weeks
New Positions: see below

Comments:
12/13 update: TMO has broken down below short-term support at $45.00. The next hurdle for the bears is prior support in the $44.40-44.30 zone. I am not suggesting new positions at this time. We only have three days left before December options expire. More conservative traders may want to exit December options now!

Our target is $42.75. FYI: The Point & Figure chart for TMO is bearish with a $41 target.

- Suggested Positions -

Long DEC $45 put (TMO1117X45) Entry $0.45
(less than 2 weeks left for Decembers)

- or -

Long JAN $45 put (TMO1221M45) Entry $1.40

12/05/11 TMO gapped open higher at $47.10

Entry on December 05 at $47.10
Earnings Date 02/01/12 (unconfirmed)
Average Daily Volume = 3.5 million
Listed on December 03, 2011


Watson Pharmaceuticals - WPI - close: 60.57 change: -0.61

Stop Loss: 64.25
Target(s): 56.00
Current Option Gain/Loss: Dec$60p: -37.5% & Jan$60p: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/13 update: WPI slipped to new four-month lows. The stock is nearing round-number support at $60.00. A breakdown here should herald a drop toward $57.50 and then $55.00. I am not suggesting new positions at this time.

Keep in mind that December options expire in three trading days.

Earlier Comments:
There is potential support at $60.00 but I am aiming for the $56.00 level.

- Suggested Positions -

Long DEC $60 PUT (WPI1117X60) Entry $0.80
(only 5 trading days left for Decembers)

- or -

Long JAN $60 PUT (WPI1221M60) Entry $2.00

Entry on December 07 at $61.75
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on December 03, 2011


Market Neutral Play Updates

iShares Russell 2000 ETF - IWM - close: 71.94 change: -1.53

Stop Loss: n/a
Target(s): TBD
Current Option Gain/Loss: -23.0%
Time Frame: up to December options expiration
New Positions: Must Be Opened on Thursday 12/08

Comments:
12/13 update: The IWM failed at its trend of lower highs this morning and then dropped to technical support at its 50-dma.

We only have three trading days left on this December options. I am not suggesting new positions at this time.

- Market Neutral Strangle - cost: 2.04 value: 1.57 (-23.0%)

Long DEC $77 call (IWM1117L77) Entry $0.58, current bid/ask $0.01/0.03

- Also Buy the -

Long DEC $73 put (IWM1117X73) Entry $1.46, current bid/ask $1.56/1.60

Entry on December 08 at $73.90
Earnings Date --/--/--
Average Daily Volume = 61 million
Listed on December 07, 2011


CLOSED BULLISH PLAYS

Caterpillar - CAT - close: 90.98 change: -2.26

Stop Loss: 95.45
Target(s): 107.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/13 update: CAT is just not cooperating. The stock continues to underperform. Shares have broken down through short-term support near $92 and are now testing round-number support at $90 and technical support at the 50-dma. Aggressive traders could buy this dip with a tight stop under $90.00. Our entry point to buy calls was never hit (@ 98.55) and we're removing CAT from the newsletter.

Trigger @ 98.55

Trade Did Not Open

12/13/11 trade did not open.
12/10/11 No change to our strategy. Use a trigger to buy calls at $98.55
12/08/11 CAT continues to slip. We will re-evaluate our entry point strategy this weekend and make adjustments or drop CAT as a candidate.

chart:

Entry on December xx at $ xx.xx
Earnings Date 01/26/12 (unconfirmed)
Average Daily Volume = 8.1 million
Listed on December 03, 2011


Cooper Industries - CBE - close: 52.20 change: -1.17

Stop Loss: 54.65
Target(s): 62.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/13 update: CBE is another stock that is not cooperating. Shares have broken down below the trend of lower highs and below technical support at the 50-dma. Our trade has not been opened yet. We are removing CBE from the play list.

Trigger @ 57.05

Trade Did Not Open

12/13/11 trade did not open.
12/10/11 We will keep our trigger to buy calls @ 57.05
12/08/11 We will re-evaluate our entry point strategy this weekend and make adjustments or drop CBE as a candidate.

chart:

Entry on December xx at $ xx.xx
Earnings Date 01/25/12 (unconfirmed)
Average Daily Volume = 3.7 million
Listed on December 06, 2011


Family Dollar Stores - FDO - close: 56.65 change: -0.74

Stop Loss: 56.75
Target(s): 64.00
Current Option Gain/Loss: - 53.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/13 update: FDO continues to sink. Shares violated the $57.00 level and broke down under its 50-dma. Our stop loss was hit at $56.75. I'd keep FDO on your watch list for a dip or a bounce near $55.00 as a possible entry point.

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.

(small positions) - Suggested Positions -

JAN $60 call (FDO1221A60) Entry $1.40 exit $0.65 (-53.5%)

12/13/11 stopped out @ 56.75
12/07/11 trade opened at $58.00 trigger
12/03/11 Adjust buy-the-dip trigger to $58.00
12/03/11 new stop loss @ 56.75
11/30 New strategy to account for FDO's bullish breakout higher. We want to use a trigger at $58.50 to open bullish positions with a stop at $56.45. New target is $64.00. I've updated our option strikes.
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

chart:

Entry on December 07 at $58.00
Earnings Date 01/04/12 (unconfirmed)
Average Daily Volume = 1.0 million
Listed on November 21, 2011


FMC Technologies, Inc. - FTI - close: 49.76 change: -2.10

Stop Loss: 49.40
Target(s): 58.00
Current Option Gain/Loss: -44.9%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
12/13 update: Yesterday we adjusted our entry strategy to buy calls if FTI hits $51.05. What a coincidence that the high today just happens to be $51.05. The stock promptly reversed lower and broke down to new relative lows. Our stop loss was hit at $49.40.

- Suggested Positions - (Small Positions)

Jan $55 call (FTI1221A55) entry $1.18*exit 0.65 (-44.9%)

*12/13/11 entry price is an estimate. option did not trade when play was triggered.
12/13/11 Trade was triggered and stopped today
12/12/11 adjusted entry point strategy. use a trigger at 51.05, stop loss 49.40, keep position size small.

chart:

Entry on December xx at $ xx.xx
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 2.9 million
Listed on December 10, 2011


Watsco Inc. - WSO - close: 63.33 change: -1.93

Stop Loss: 63.25
Target(s): 69.50
Current Option Gain/Loss: Jan$65: -73.9% & Jan$70c: -73.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/13 update: WSO underperformed the market today with a -2.9% decline. Shares saw their early morning rally reverse at $66.00 and then the pull back turned into a route with a drop to $62.77 before bouncing. Our stop was hit at $63.25. Today's move has created a bearish engulfing candlestick reversal pattern.

- Suggested Positions - These options are suffering from wide spreads!

Jan $65 call (WSO1221A65) Entry $3.45* exit 0.90 (-73.9%)

- or -

Jan $70 call (WSO1221A70) Entry $1.15* exit 0.30 (-73.9%)

12/13/11 stopped out at $63.25
*12/09/11 entry prices are estimates. options did not trade at the time WSO hit our entry point.

chart:

Entry on December 09 at $65.55
Earnings Date 02/14/12 (unconfirmed)
Average Daily Volume = 227 thousand
Listed on December 07, 2011