Editor's Note:

The market produced a widespread decline thanks to some disappointing earnings results and guidance on Friday.

I am removing SPW as a candidate and I've updated a couple of stop losses and targets below.

Current Portfolio:


CALL Play Updates

Diageo Plc. - DEO - close: 112.87 change: +0.22

Stop Loss: 111.90
Target(s): 119.75
Current Option Gain/Loss: -44.7%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/20/12: It was a down day for the market on Friday and DEO continued to slip lower but only lost 22 cents. Shares do look vulnerable here with the recent close under its 20-dma. DEO is approaching what should be support near $112 and the bottom of its rising bullish channel. I would be cautious on new positions. Wait for a rally back above $114.00 before launching new plays.

More aggressive traders may want to give their stop loss more room and place it under the 50-dma instead.

Earlier Comments:
The stock tends to gap open each morning as shares here in the U.S. react to trade that started in Europe. Thus we want to limit our position size due to the volatility.

- Suggested *Small* Positions -

Long NOV $115 call (DEO1217k115) Entry $1.90

chart:

Entry on October 17 at $114.24
Average Daily Volume = 529 thousand
Listed on October 16, 2012


Health Care REIT, Inc. - HCN - close: 59.77 change: -0.76

Stop Loss: 58.80
Target(s): 63.50
Current Option Gain/Loss: -41.6%
Time Frame: exit prior to earnings on Nov. 6th,
New Positions: see below

Comments:
10/20/12: The stock market did not cooperate with us on Friday and HCN succumbed to the market-wide sell-off. Shares of HCN opened at $60.68 and then retreated back toward the $60.00 level. Unfortunately the close under $60.00 is short-term bearish since broken resistance there was supposed to be new support.

I would wait for a new bounce above $60.25 before launching new positions. Our multi-week target is $63.50 but we'll exit prior to the Nov. 6th earnings report. FYI: The Point & Figure chart for HCN is bullish with a $70 target.

- Suggested Positions -

Long NOV $60 call (HCN1217k60) Entry $1.20

chart:

Entry on October 19 at $60.68
Average Daily Volume = 2.8 million
Listed on October 18, 2012


Medivation, Inc. - MDVN - close: 52.95 change: +1.84

Stop Loss: 49.95
Target(s): 57.00
Current Option Gain/Loss: - 8.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
10/20/12: Thank the trading gods that MDVN finally bounced. After a two-week decline and a breakdown under its 50-dma, shares finally rebounded. The close back above its 50-dma is a positive sign. We can use Friday's bounce as a new bullish entry point.

Earlier Comments:
We will plan to exit prior to the early November earnings report.

- Suggested Positions -

Long Nov $55 CALL (MDVN1217K55) Entry $2.00

10/20/12 Friday's bounce looks like a new entry point.
10/17/12 MDVN is not cooperating and closed under the 50-dma, readers may want to exit immediately.
10/15/12 triggered @ 52.50

chart:

Entry on October 15 at $52.50
Average Daily Volume = 780 thousand
Listed on October 12, 2012


Noble Energy, Inc. - NBL - close: 94.24 change: -2.26

Stop Loss: 92.75
Target(s): 99.75
Current Option Gain/Loss:(Oct95c: - 6.8%) & Nov95c: -27.4%
Time Frame: exit prior to earnings on Oct. 25th
New Positions: see below

Comments:
10/20/12: Ouch! What happened to NBL on Friday? I could not find any company-specific news that might account for the -2.3% decline. Looks like profit taking after a four-day bounce. It could also suggest a new lower high for NBL. I am not suggesting new positions at this time. Keep in mind that we do not want to hold over the late October earnings report (Oct. 25th). We only have THREE days left for this trade.

Traders may want to raise their stop loss.

- Suggested Positions -

(closed on Oct. 18th at the open)
Oct $95 call (NBL1220j95) Entry $1.45 exit $1.35 (- 6.8%)

- or -

Long Nov $95 call (NBL1217k95) Entry $3.10

10/18/12 closed the Oct. call at the open this morning
10/17/12 new stop loss @ 92.75
Prepare to exit the Oct. $95 call at the open tomorrow morning

chart:

Entry on October 08 at $94.25
Average Daily Volume = 1.0 million
Listed on October 2, 2012


PUT Play Updates

ITT Educational Services - ESI - close: 26.06 change: -1.22

Stop Loss: 30.05
Target(s): 25.25
Current Option Gain/Loss: +35.4%
Time Frame: exit prior to earnings on Oct. 25th
New Positions: see below

Comments:
10/20/12: ESI continues to underperform and gave up -4.4% on Friday to hit new multi-year lows. I am adjusting our exit target to $25.25. The low on Friday was $25.42. More conservative traders may want to go ahead and take profits right now since ESI looks short-term oversold here. I am lowering our stop loss to $30.05. I am not suggesting new positions at this time.

The bid on our 2013 Jan. $27.50 put has risen to $4.20.

NOTE: We only have THREE trading days left on this trade to avoid holding over earnings.

Earlier Comments:
I want to reiterate my caution about using small positions. ESI already has a high amount of short interest because so many investors think this stock is going lower.

- Suggested *SMALL* Positions -

Long 2013 Jan $27.50 PUT (ESI1319m27.5) Entry $3.10

10/20/12 new stop loss @ 30.05, readers may want to go ahead and take profits now (+35%). Adjust target to $25.25.
10/17/12 new stop loss @ 30.40

chart:

Entry on October 04 at $29.47
Average Daily Volume = 408 thousand
Listed on October 3, 2012


Garmin Ltd. - GRMN - close: 38.93 change: -0.82

Stop Loss: 40.60
Target(s): 36.00
Current Option Gain/Loss: +21.0%
Time Frame: exit prior to the Oct. 31st earnings report
New Positions: see below

Comments:
10/20/12: There was no follow through on Thursday's bounce and GRMN failed at the $40.00 level. The stock gave up -2.0% on Friday. Readers can use Friday's decline as a new entry point.

Earlier Comments:
We want to limit our position size since the most recent data listed short interest at 16% of the 123 million share float. We will plan to exit prior to the October 31st earnings report.

- Suggested *Small* Positions -

Long NOV $40 PUT (GRMN1217w40) Entry $1.85

chart:

Entry on October 18 at $39.51
Average Daily Volume = 787 thousand
Listed on October 17, 2012


Starbucks Corp. - SBUX - close: 45.69 change: -1.72

Stop Loss: 47.05
Target(s): 45.10
Current Option Gain/Loss: +70.3%
Time Frame: exit prior to the early November earnings report
New Positions: see below

Comments:
10/20/12: Some of the earnings reports and guidance in the food/restaurant industry on Friday were disappointing. Shares of SBUX gapped open lower and then plunged to $45.40 intraday. SBUX settled with a -3.6% decline. I am lowering our stop loss to $47.05 and moving our exit target higher to $45.10.

More aggressive traders could aim lower since SBUX appears to be in a new trend of lower highs and lower lows.

- Suggested Positions -

Long Nov $50 PUT (SBUX1211w50) Entry $2.73

10/20/12 new stop loss @ 47.05, adjust exit target to $45.10
10/18/12 new stop loss @ 49.51

chart:

Entry on October 08 at $48.40
Average Daily Volume = 8.1 million
Listed on October 6, 2012


CLOSED BULLISH PLAYS

SPX Corp. - SPW - close: 67.83 change: -1.11

Stop Loss: 68.40
Target(s): 74.00
Current Option Gain/Loss: Unopened
Time Frame: exit prior to earnings on Oct. 31st.
New Positions: see below

Comments:
10/20/12: We have been waiting for SPW to breakout past resistance near the 200-dma and the $70.00 level but it's not happening. The stock has struggled under this resistance all week.

I am removing SPW as a candidate.

Trigger @ 70.25

Our trade did not open.

10/20/12 removed from the newsletter. Did not open.

chart:

Entry on October xx at $ xx.xx
Average Daily Volume = 594 thousand
Listed on October 15, 2012