Dear Bottarelli Research Member,
And here we go ahead. As I write, the Dow is off by 230 points and the panic selling could be just about to set in. As a result, let’s make another cheap and dirty downside play by adding a November put on InterContinental Exchange (ICE – NYSE).
As you can see, ICE has been moving higher in recent days, but has just started to reverse course and move down. If the stock re-tests its 50-day moving average, that means at least $10.00 more of downside action. And if ICE re-tests its recent lows, we’re talking about $40.00 of downside, so let’s make a quick play to capitalize on this weakness!
PLAY: Buy the ICE November 170 Puts (IHH WN) at or under $6.70, good for the day. Current bid/ask spread is $5.90 to $6.40. Place a protective stop limit at $3.60.
Also, considering the massive bearishness we’re witnessing in the major U.S. credit agencies, I think it’s a smart idea to look at similar companies operating in North America which haven’t received nearly the same account of selling pressure. Case in point, take Toronto-Dominion Bank (TD – NYSE).
TD operates 1,017 branches in Canada — offering wealth management, mortgage banking, and other financial services to approximately 1.5 million households in the Northeastern and mid-Atlantic regions of the U.S. While companies like Washington Mutual (WM – NYSE), Citigroup (C – NYSE), and nearly every brokerage firm are setting new 52-week lows, TD has been able to remain well above its 52-week lows simply because they operate in Canada. If our recent credit troubles are indeed global, as many investors fear, then TD should experience the same sort of downside action as all the other major banks and credit agencies. Therefore, if we really begin to see an all out crash, I’ll be adding puts on TD as well. Until then, let’s sit tight.
Lock and load