• Thanks for your questions and comments to the Diary.

I enjoyed the time here, big thanks to Tim Collins for inviting me to be side-saddle.  Thanks for the questions and comments. Hope I am invited back soon!  I'll be lurking.

The shares are trading lower after hours, despite the company beating on the top and bottom lines for the quarter.

By Tim Collins

Vera Bradley (VRA) is trading below $25 in the after-hours session right now, even though the company beat on the top and bottom lines for the quarter. The issue is the guidance of $0.55 to $0.57 with revenue in the range of $147 million to $152 million vs. expectations of $0.60 on revenue of $159.5 million.

• I bought time and am entitled to use it.

By Bob Lang

One of the difficulties in following my particular style of option trading is the time element. I am often asked about stops, but when you think about it -- if you buy time on the expectation that your chart read is correct, why do you need a stop on the option price? If the chart breaks, that's a different story -- then yes, time to leave the trade.

Ever been in a trade that didn't start working well, sell it and then it takes off? I've kicked myself over it many times. But I changed my focus. I may stay in the trade until the very end (12:58 p.m. PST on the Friday of expiration) because I bought time and am entitled to use it -- all of it. That flies in the face of the conventional wisdom, time decay being the enemy of the option buyer.

I buy based on the chart and will trade out of it (mostly) based on that.

• I am adding both December and January $20 calls here.

By Tim Collins

The last of the retail trio is a long trade in Ascena Retail Group (ASNA). This company has good diversity in its stores, touching on the teen female market, the more mature (and more budget-conscious) ladies market and an avenue for more shapely women to find nice clothes that fit their physique.

Ascena Retail Group (ASNA)

Source: StockCharts.com

View Chart »View in New Window »

The chart is a bit muddled but slightly favors the bulls. It is the story behind the company that I favor on this one. I am adding both December and January $20 calls here, just dividing up my play. The Decembers have the higher risk and the higher reward, but Ascena could see a push over $21 on good results.

• I am a buyer of January/December $25 put calendar spreads for $0.45 as well as half as many additional January $25 puts at $1.40.

By Tim Collins

On the short side of the three retailers for me tonight is Vera Bradley (VRA). I think we see one more quarter of muddled guidance. The stock is losing price support and could easily get as long as $23 on any disappointment although $25 is my target based on the charts.

Vera Bradley (VRA)

Source: StockCharts.com

View Chart »View in New Window »

I am a buyer of January/December $25 put calendar spreads for $0.45 as well as half as many additional January $25 puts at $1.40. I don't want to short the stock outright, hence my use of puts here.

• I am long the December $32 straddle at $3.60.

By Tim Collins

I'm looking at a trio of retail earnings plays into the afternoon. First up is Men's Wearhouse (MW). Options are looking for a move around $3.65, but $4-$6 looks possible to me.

Men's Wearhouse (MW)

Source: StockCharts.com

View Chart »View in New Window »

I am long the December $32 straddle at $3.60, looking for a move to either $28 (or lower) or $36 (or higher) after earnings.

There isn't a huge short interest here, but there is a nice wedge formation, which looks like it should break after we see results tonight. No sense to me in trying to guess direction on this one.

• You can and should track this regularly.

By Bob Lang

If you ever wondered why at times all stocks either sink or rise together when it doesn't make sense, look at the Implied Correlation Index (JCJ) to explain it -- the higher the price the higher the correlation to the index.

Remember fall 2011, when it seemed as though every time the futures were down huge, everything in the equity market went down with it and vice versa? Well, back then the correlation was high and rising.

JCJ

Source: Bloomberg

View Chart »View in New Window »

In fact, these days you can track this regularly. If you see the markets dropping or rising sharply several days running I bet the JCJ is moving. As a stockpicker, I look for low correlation with the markets. In other words, I want stocks to move on their own merit. There is truly a difference between a stock market and a market of stocks.

My colleagues Phil McDonnell and Jill Malandrino have done numerous articles and studies about correlation over on OptionsProfits. Check it out to learn more.

• What happens when you bring together two immovable objects?

By Tim Collins

Rhetoric is going to continue to flow out of D.C. Both parties want to make this a public argument and media blitz rather than spending time behind closed doors and actually hammering out a compromise. Compromise has been replaced with stubbornness and brute force.

What happens when you bring together two immovable objects?

Traders would have more luck playing, "She loves me, she loves me not" than to deal with the immediate and almost senseless spikes we see on every headline. It is still very, very clear that we will rally on any framework of a deal. Every spike higher on the whiff of something optimistic demonstrates that, but how long will the rally last? Weeks, days or merely hours?

If you subscribe to the notion that the market causes the most pain to the most people, then you should look to fade any significant spike (not just 1% or 2%) on the announcement of the deal. If we do see a 1000-point rally in the DJIA, then I believe it will make for a wonderful shorting opportunity.

Based on the language, body, not just spoken, any deal is going to be hollow and without substance. If people don't see through it quickly, the economy will. When more time is spent with the press than in negotiations, you know any deal will be last minute and weak in the long run.

• I've picked up a January $665/$700 vertical call spread here at $14.40.

By Bob Lang

Priceline (PCLN) -- Daily

Source: StockCharts.com

View Chart »View in New Window »

• Count me in on Freeport-McMoRan.

By Bob Lang

I'm joining in with Tim on a Freeport-McMoRan (FCX) play but done a bit differently. I've bought the January 2014 (LEAP) 33 call at $4.60 and sold the January 2014 (LEAP) put for $4.25, a net cash outlay of $0.35 per contract.  Hence, I wouldn't mind having the stock put to me under $30, and I have total upside on a move of above $33.35 by next year. 

The best thing is, I can manage this thing in a number of ways as the year goes on or just leave it alone. Margin required of course, it appears about $800 per contract in non-retirement accounts. To get by that, you could sell the 30/23 put spread, but there is a higher debit.

• A good recent example of a bullish pattern can be found in BlackRock.

By Tim Collins

Usually when you hear the term "channels," it comes in the context of retail channel checks or sales data. However, many technicians use channels as well, and in this context they can form in three different ways: bullish, bearish or range-bound sideways. Flags can often be interchangeable with channels, but I view a channel as a pattern with a longer time frame, and something that isn't often part of another formation -- for example, the handle on a cup-and-handle pattern.

BlackRock (BLK) -- Daily

Source: StockCharts.com

View Chart »View in New Window »

A good recent example of a bullish pattern is BlackRock (BLK), which is showing a great demonstration of higher highs and higher lows. Since July, a trader could have bought the lower range of the channel and sold the higher range of the channel at least three times. The stock has climbed $36 from the late-July low, but a channel trader catching those three trades would have made almost $50 during that same move. This is a pretty basic trading approach.

Expanding the technical look at BlackRock strengthens this approach. In the case of this stock, the test of the lower support level corresponded with an oversold reading in the stochastics, while the test of resistance came with the relative strength index. The RSI runs in a channel, as well -- but, due to the static levels, one cannot expect it to run higher on a long bullish channel. As long as that sideways channel stays in play, a bearish divergence won't appear. If I were to see a bearish divergence in the RSI, I would be more conservative on my trade approach, with a smaller position size and tighter stops.

A bearish channel would work in reverse, while a sideways channel would form multiple bottoms and multiple tops. The sideways pattern is a bit riskier, as a break over the resistance or under support could result in a significant and quick move. So there is obviously a potential for the channel trade, but also for a breakout or breakdown trade.

• If you're looking for insight into the market's movement, don't listen to CNBC.

By Bob Lang

With money and the markets so tightly wound, investors and traders are looking to push the envelope every day in search for an edge. Speed of gathering and processing information is a great edge.

After the news hit of a deal with Disney (DIS), Netflix (NFLX) was cooking and moving on higher volume after midday Tuesday. But that advantage is clearly not brought to you by the media, specifically CNBC, Bloomberg and Fox (among others). These outlets act more like ambulance chasers than true caregivers. While there are few alternatives available to me (other than ESPN or the mute/off button) I find myself cringing when Bill Griffith attempts to explain away why the Dow is down 100 points, or seeing Brian Sullivan yelling at the cameras that it's the "politicians fault we are going over the cliff and they don't care about us." Is this really information we can use to navigate markets?

I loathe the bickering and badgering of guests who simply want to come on the show to express a viewpoint, not to be insulted or ridiculed. Some of our contributors on Real Money or TheStreet unfortunately fall into this category (give them a chance to talk so we can learn from them!).  

I need to find the reason for a sharp move up or down and sometimes the media is the best/fastest way. Twitter is also a good outlet, but it can be too obtuse. A little less media (social or other) could do us a world of good. Let's keep the noise level down and focus on what can really help us gain that edge.

• Namely, in Cheniere and Symantec calls.

By Bob Lang

I am seeing strong option volume in Cheniere Energy (LNG) December 19 calls today and Symantec (SYMC) April 20s.

These robust buys always pique my interest.

• I am adding to my Mattress Firm trade.

By Tim Collins

A slightly twisted addition for my Mattress Firm (MFRM) position:

• long 100 shares
• short 1x December $25 call
• long 1x December $25 put
• long 1x January $22.50 put
• short 3x December $22.50 put

The option position cost $0.90 on top of the stock buy at $23.60.

The risk here is on a move under $22.50. If the stock stays over $22.50, then this has an intrinsic value of $1.40 against that $0.90 option cost -- plus it would leave a January 22.50 put, which could have value after the December expiration, especially if the share price is still between $22.50 and $25.

I am using the historical performance of the stock after big gap downs recently. The stock has not significantly violated the low of the day after the gap down.

• This is a short-term bump for a big-time long-term payoff.

By Tim Collins

I did not get my $31.09 entry, but did get the $32.40 entry and $33.25 entry on Freeport-McMoRan Copper & Gold (FCX), as per my morning post and the post in the comments section. I don't see any reason not to flip out the $32.40 entry for a quick buck and hold the other portion on Freeport here.

I think the stock was hit due to the price Freeport paid, but given the company's past relationship with McMoRan Exploration (MMR, previous spinoff) and McMoRan Exploration's relationship with Plains Exploration & Production Company (PXP), I feel the integration risk is significantly lower than the market may be pricing here.

These companies all have a history, a working knowledge of each other in some manner. Familiarity is a huge plus here. This is a short-term bump for a big-time long-term payoff. The $33.25 entry is one I will file away in the fundamental buy part of the portfolio.

• The Fed and federal income tax will turn 100 in 2013.

By Robert Lang

The Fed will celebrate 100 years of existence in 2013, and I suspect a ticker tape parade of flying dollar bills may be in order, while others may be throwing them into the fire.

In addition, Feb. 3, 2013, also is an ominous day. As we hear Congress and the President continue debating over tax revenue and spending before year-end, in two months we'll all be celebrating the 100 years of the federal income tax. Oh joy! You know, the day in 1913 when government took over our lives. The initial tax was small but kept rising over the years, but when the genie is out of the bottle you know it can't be put back in.

• I am buying at $33.25 to $33.35 premarket.

By Tim Collins

I'm on the Freeport-McMoRan Copper & Gold (FCX) bandwagon here buying at $33.25 to $33.35 premarket.

On the surface, I like these acquisitions.

• Be certain that you understand the time frame behind your trade thesis.

By Tim Collins

Some things are worth repeating. If you didn't read Bob Byrne's commentary regarding generational buys (or sells) yesterday, then make certain you read it before you begin the day. I am not one for generational calls. There is no guarantee I'll even live long enough to see if the call is correct or incorrect.

The most important take here, though, is the context of time. What is your time frame for a trade? A lot of this comes down to what type of trader or investor you are. A technical trader may have more leeway in regards to time. You can invest from one second to 100 years based on the technicals, but more often than not, you are active. Even on a long time frame, you are still watching for breakdowns that are moving against your position or breakouts to expand your position.

Being technical requires an almost nonstop vigil. I don't believe technical traders can make generational calls. I know some will disagree, but this is coming from a technical trader. It doesn't mean they won't, but for me, there simply isn't enough data on enough securities to make the call from a technical standpoint 15 or 20 years down the road.

While I believe it incredibly difficult to make those long-term calls, if anyone could do it, it would be a fundamental trader. I still think too many things can happen and change over a 15- or 20-year time frame, so I wouldn't be comfortable making those calls anyhow, but the one big difference I have between my technical and fundamental entries is time frame.

When I trade on technicals, I am on the constant vigil. Often, I could care less about fundamentals. If I cared about fundamentals, there would be no way I would have been buying First Solar (FSLR) or Green Mountain Coffee Roasters (GMCR) call options or call spreads over the past few weeks. None. But my time frame wasn't a generation. It wasn't a year. Heck, I wasn't sure if it was going to go beyond a day, let alone a week. Trades there are more often about movements, prices and patterns rather than time, although there are timed patterns such as the ones I use for iShares Barclays 20+ Year Treasury Bond Fund (TLT), but these are in the minority.

When I buy something based on fundamentals, however, then I am buying it to hold. I am buying for a reason inherent in the company, business and/or sector. I do not sell unless there is a major change in the underlying fundamentals. Being a technical trader, I may hedge, but seldom will I outright sell a fundamental purchase based on a technical reason.

For example, I did sell, at a big loss, some coal holdings because the underlying fundamentals changed some due to government policy along with overall weak economies. But a name like Phillips 66 (PSX), I don't even check on a daily basis. I don't need to. Half the time when it is having a good day, I find out because Bob Byrne sends me a Skype asking me if I noticed the move. I will check it every few days for short-term pattern moves to see if I need to take any short-term hedging action similar to what I did a few weeks back with Altria Group (MO). There I bought puts against my long shares for a short-term technical hedge, but I had no intention of selling shares nor did I sell shares. Nothing changed fundamentally and I have no plans of selling either Phillips 66 or Altria in the near term, so I have no reason to monitor them on a tick-for-tick basis.

In the end, just be certain you understand the time frame behind your trade thesis. Drown out the talking heads if they discuss one of your holdings based on a thesis different from yours. Obviously, you want as much information as possible, so you don't want to ignore it, but a generational call isn't monitored on a tick-for-tick basis nor is a technical trade overly concerned about fundamentals. Listen? Sure, if you want, but be careful not to overreact to the antithesis of your trade thesis.

• If I help to break the 'Collins drop' streak today, maybe I'll start a new bull trend indicator.

By Bob Lang

The market seems to have a terrible habit of coming up lame when Captain Tim Collins runs the show, I think his streak is now up to six but I'm not sure. He chuckles about it, but some of the bigger market flops of late have come on these days, and many of us have come to buy that protection when Mr. Collins parks his car in the diary. Bob Byrne tried to turn the tide yesterday but came up a bit short, save for the transports.

Now, it's really not fair to blame Tim for the down days (or is it?) as much as it is to give credit to Doug or Ed Ponsi for the up days. It's clearly a random event, much like flipping a coin. One thing we have seen during these recent selloffs has been great buying chances. In fact, if you used the "Collins drops" as buying opportunities you probably made some really good coin.

As you may know, I'm an options trader and have little patience for anything long term (well, at least longer than a couple months). Shorter-term volatility suits my needs just fine. I generally post trade ideas on Columnist Conversation or even in an article but will whip up some trading ideas right here for you during the day. I look forward to the discussion! Who knows? If I help to break the streak today, maybe I'll start a new bull trend indicator.