Worried = Irrational

Maintain Calm in Uncertainty

By Bryan Bottarelli
Thursday, June 08, 2006 11:39 AM EST
Thu, 8 Jun 2006 16:39:00 GMT

PLAY: Sell your QQQQ July 40 Puts (QQQ SN) at or above $2.50, good for the day.

Dear Bottarelli Research Member,

Without question, the markets on a world-wide scale are worried.

That’s why you’re seeing such irrational behavior across the globe.

In times like this, it’s important to have a voice of reason. After all, extreme levels of fear like this can lead to tremendous opportunity. And that’s what I’d like to provide with today’s message.

First of all, the protective QQQQ July 40 Puts (QQQ SN) are certainly doing their job. You entered them for $2.00 this morning, and they’ve already traded as high as $2.50. That’s a 25% gain in a matter of minutes!

Second, I’ve been saying for over a month now that the markets have priced in two more 25-basis point rate hikes. I’m still sticking to that opinion, but I’m now making one slight alteration. The markets are now pricing in a 50-basis point move on June 29th. In other words, all 50-basis points will come at once. Anything less and we’ll see a relief rally.

Third, and more importantly, there are still incredible companies out there. And we’ll play — and profit — off every one of them. As soon as the dust settles from this market panic, we’ll probably see more short-term trading opportunities than ever before. So let’s keep our wits and take advantage of what the market is now handing us: a potentially HUGE buying opportunity.

In terms of today, let’s take some short-term profits off the table. Like I mentioned above, the QQQQ July 40 Puts (QQQ SN) you entered this morning for $2.00 have already traded as high as $2.50 today. 25% in less than two hours — how can you argue with that? Let’s use this intense selling pressure to take some profits. Heck, we can always buy more protective puts tomorrow if we need to!

PLAY: Sell your QQQQ July 40 Puts (QQQ SN) at or above $2.50, good for the day. Current bid/ask spread is $2.50 to $2.60.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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