Two Grossly Undervalued Buys

Add SIL and EXM Calls

PLAY: Buy the SIL January 2010 2.5 Calls (YSB AZ) at or under $2.50, good for the day. Place a protective stop limit at $0.70 and implement our scaled-selling technique as your position achieves gains of 50% (and greater).

PLAY: Buy the EXM March 15 Calls (EKN CC) at or under $6.00, good for the day. Place a protective stop limit at $2.70 and implement our scaled-selling technique as your position achieves gains of 50% (and greater).

Dear Bottarelli Research Member,

Another volatile week has come and gone. But through it all, I must admit that many of our recent LEAPS positions have been handing us some really nice profits.

For example, just look at our two picks from last week. We already took half of our profits on the Crown Castle April 35 Puts (CCI PG), which resulted in a 53.85% gainer. And we also locked in all of our profits on the Priceline January 80 Puts (PUZ MP), which resulted in a 51.85% gainer.

Not to be outdone, we’ve also recently locked in half of our 50% gains on the General Mills April 70 Calls (GIS DN), half of our 86% gains on the ABX January 2010 40 Calls (WRX AH), and half of our 42% gains on the CBOE Volatility Index October 25 Calls (VIX JE). Best of all, all three of these positions continue to look promising going forward. I expect the gains to increase in the weeks ahead, so maintain the second half of these three for more upside.

In terms of full profits, we’ve recently locked in 87.50% on our Las Vegas Sands December 40 Puts (LVS XH), 28% on our Ultra Short Dow30 Pro Shares October 65 Calls (DXD JM), 41.86% on our Deckers Outdoor September 90 Puts (QUK UR), and 27.4% on our Salesforce.com November 55 Puts (CRM WK). Once again, nice trading!

Now I openly admit: We have yet to see similar gains in some of our other LEAPS positions — notably AMX, PBR, and ETR calls. But over the last few weeks, our profit margins have made a tremendous up-turn, and this sets a very positive note going forward. So today, let’s continue our recent winning streak by adding two new LEAPS positions. Without exaggeration, each of these positions could hand you eye-popping returns. And when I say “eye-popping,” I’m talking 100% to 200% at the very least.

So let’s get right into it!

The first new play has a political twist. You see, no matter what happens with the Fed’s $700 billion bailout plan, it’s quite clear to me that the world markets will soon be flooded with U.S. dollars. As a result, I remain very bullish on owning positions that have upside exposure to the metals markets.

As I mentioned above, we’ve seen a dramatic upside move on our ABX calls, which was a direct result of the Fed’s inflationary moves. This sparked a rush of new money into metals, notably gold. And as gold moves up, the next opportunity will follow in silver. Today, one of the most incredible LEAPS opportunities you’ll ever come across happens to be found in shares of junior silver miner Apex Silver Mines (SIL – AMEX).

Apex Silver Mines currently has proven and probable reserves of 443 million ounces of silver, 8.43 billion pounds of zinc, and 2.92 billion pounds of lead. They control the rights to various claims located in the silver-producing regions of Central and South America, including Argentina, Mexico, Peru, and Bolivia.

Due to the political risk of the Bolivian government, the stock currently trades for only $2.30 per share. After all, the risk is that the government of Bolivia can expropriate SIL’s mines. But for only $2.30 per share, I think this risk is completely priced into the stock. Therefore, this leaves you with a tremendous amount of shareholder value that could be “unlocked” if this risk subsides. That’s huge upside potential, especially when you combine this explosive upside trigger with the ever-increasing amount of money that’s now flowing into silver.

Best of all, SIL offers LEAP options that go out until January of 2010, offering you plenty of time to see a strong up-move for a very low cost of carry. Throw it all together, and we have all the makings for a very powerful play. So as the first order of business, let’s add January 2010 calls on SIL to our LEAPS ledger now!

PLAY: Buy the SIL January 2010 2.5 Calls (YSB AZ) at or under $2.50, good for the day. Place a protective stop limit at $0.70 and implement our scaled-selling technique as your position achieves gains of 50% (and greater).

Today’s second play comes in the form of Excel Maritime Carriers (EXM – NYSE).EXM is a shipping company that provides seaborne transportation services for dry bulk cargoes, such as iron ore, coal and grain, steel products, fertilizers, cement, bauxite, sugar, and scrap metal. As of May 15^th 2008, EXM’s fleet consisted of 47 ships with a total carrying capacity of 3.7 million deadweight tons. But as you can see from the chart, shares of EXM have fallen dramatically over the last six months, moving from $60.00 down to their current levels around $18.00.

The fall was due to concerns about the global financial markets, combined with a sell-off in all of the commodities that EXM ships. As a result, the rates on capsize vessels (which is how EXM charges customers for shipping their loads) has fallen down to $67,554 per day. At this time last year, these same rates were $129,876 per day. But once again, let’s put this into perspective.

Most importantly, dry bulk shipping is a global market that will be in high demand for years upon years to come. Therefore, I view this recent down-move as a short-term panic sell-off, sparked by financial and commodity-price weakness on a global scale.

You see, I’ve followed the dry bulk shipping sector for years, and I must tell you, this group of stocks can make very strong and aggressively moves. That’s why I think we should use this extreme weakness to get positioned to profit off a recovery in the dry bulk shipping sector.

After all, iron ore stockpiles are accumulating at Western Australia loading ports. Rio Tinto and BHP Billiton have both started chartering ships again. Chinese steel production is expected to resume in the wake of the Olympics, and coal shipments should pick up as winter approaches. All of this, combined with a resolution to our financial crisis, could spark a strong recovery in shares of EXM. As a result, let’s get positioned to ride this recovery using LEAPS calls now. Here’s the play…

PLAY: Buy the EXM March 15 Calls (EKN CC) at or under $6.00, good for the day. Place a protective stop limit at $2.70 and implement our scaled-selling technique as your position achieves gains of 50% (and greater).

UPDATES

Crown Castle International April 35 Puts (CCI PG) & Priceline.com January 80 Puts (PUZ MP): Two really nice gainers here! We closed out our PCLN puts, which leaves us holding the second half of our CCI puts. Currently showing a 53% gain, maintain these puts for more gains. Hold.

General Mills April 70 Calls (GIS DN): Consumer staple companies like GIS continue to hold their water in the midst of the market turmoil. Hold the second half of the position for more upside. Hold.

Wells Fargo January 2009 30 Puts (WFC MF): Next Friday is October 3^rd, which happens to be the day of reckoning for the 799 stocks on the “do not short” list. It’ll be very interesting to see what happens on this day. Considering WaMu’s failure, I want to remain short the financial sector. Maintain your WFC puts. Hold.

Southern Peru Copper January 2010 25 Calls (YPV AE), Barrick Gold January 2010 40 Calls (WRX AH) & United States Natural Gas Fund January 40 Calls (UNG AN): I noted last week that we witnessed a fantastic come-back on all three of these positions. And this week, we were able to lock in half of our profits on ABX. Nice trading! Going forward, I love the prospects for all three plays. Hold for more gains. Hold.

CBOE Volatility Index October 25 Calls (VIX JE): Once again, the tremendous market volatility helped push our profits up to 75%, as these calls traded as high as $4.90 on Friday. If these calls reach the 100% profit level, lock in the remainder of your gains! Sell at 100%.

Valero Energy January 35 Calls (VLO AG): My view is the same as last week. With oil prices settling in at $100.00 per barrel, I continue to like the profit potential of oil refiners. Hold.

America Movil January 2009 70 Calls (AMX AN), Petroleo Brasileiro January 90 Calls (PMJ AR) & Entergy January 140 Calls (ODF AH): Once again, a mid-week recovery was quickly reversed, bringing these positions back down. At current levels, let’s hold for a miracle recovery. Hold.

Sincerely,