Action Alert: “Black Sunday”

DXD and VIX In Play

By Bryan Bottarelli
Monday, September 15, 2008 10:11 AM EDT
Mon, 15 Sep 2008 14:11:00 GMT

Dear Bottarelli Research Member,

Over the weekend, a handful of events occurred that’ll shape the financial landscape forever. Former Fed chief Alan Greenspan said that the USA in now in a "once-in-a-century’ financial crisis.” And this morning, the major market averages are reacting with a devastating drop to the downside.

Since last Friday, Lehman Brothers has officially gone belly up, Bank of America has agreed to buy Merrill Lynch for $50 billion, and the Feds have balked about putting up more taxpayer money to save more troubled institutions. Therefore, monetary officials from Washington to London to Brussels to Beijing have all stepped in to add liquidity to the credit markets.

In short, today could be one of the most volatile days we’ve seen all year. And as a result, the so-called “protective positions” that I’ve insisted that you hold in your ledger are coming into play — big time — on a day like today.

Notably, the CBOE Volatility Index October 25 Calls (VIX JE) and the Ultra Short Dow 30 Pro Shares October 65 Calls (DXD JM) are each offering you much-needed portfolio protection on a day like today. Be sure to maintain each of these positions, and when it’s time to lock in any profits, you’ll be the first to know.

VIX

Let’s also go ahead and officially close out some of our longer-dated upside positions that just cannot maintain any upside momentum in this crushing market environment. Notably, let’s close out the Overseas Shipholding Group January 95 Calls (OSG AS) and the JA Solar Holdings January 15 Calls (QJP AC). While I continue to like the prospects of each stock going forward, it’s just too dangerous to maintain such positions in a market like this. Therefore, if you haven’t already done so, close each of these positions now. And if any further “action alerts” need to be issued, you’ll be the first to know.

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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