One Good, One Bad

Exit AIRM, Hold WFC

By Bryan Bottarelli
Tuesday, August 29, 2006 1:00 PM EST
Tue, 29 Aug 2006 18:00:00 GMT

Dear Bottarelli Research Member,

If you’re like me, you’re counting down the minutes until the calendar moves from August to September. What’s happening as we drag through the last (and worst) part of the summer doldrums is that reduced trading volumes are starting to take their toll on options premiums — which results in a gradual deterioration of time premiums across the board.

As I’ve said before, this is why I’ve purposely kept the trading ledger ultra-light, trading only one cheap call on AIRM and one cheap put on WFC. And based on today’s trading, I think we should trim our ledger even further, as AIRM just can’t seem to mount the upside momentum that I want to see.

Looking at today’s AIRM chart, the bearish engulfing pattern signals that the bears have taken control of AIRM. Therefore, the wise move is to exit your AIRM September 25 Calls (UDU IE) at market.

AIRM

The good news is that WFC is putting in a nice red candlestick day. As you can see by the chart, it’s approaching the 50-day moving average at $34.50. This down-move has put your WFC October 35 Puts (WFC VG) back to our entry point at $1.00, and any further downside will result in a profitable trade.

WFC

Towards the end of this month, I plan to have my next special report ready for release. This report will use the decreased time premiums to recommend longer-term and cheap options that could each double by January of 2007. As the markets continue to grind, I’ll work to complete my due diligence on this next report so it can be ready for release some early September. Until then…

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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