Three New Puts as Markets Begin to Fall

Play MNST, SBUX, and RIG Lower

By Bryan Bottarelli
Wednesday, October 11, 2006 3:21 PM EST
Wed, 11 Oct 2006 20:21:00 GMT

Dear Bottarelli Research Member,

In the last half hour, two things have spooked the market which is driving the Dow lower.

First, a small helicopter has reportedly crashed into a building in New York City (although it’s not terror-related).

Second, minutes from the Federal Reserve’s last meeting showed the central bank had an easier time deciding to stand pat on interest rates last month than in August.

Both items have caused a sell-off on the Dow that could spark the beginning of extended downside. Plus, the fact that Q3 earning are disappointing Wall Street no matter if they’re good (DNA) or bad (MON) certainly does not bode well for the major market averages. So let’s use this selling pressure to enter into three new put plays that I’ve been tracking:

PLAY #1: Monster Worldwide (MNST – NASDAQ)

MNST

As you can see, a classic double-top formation at $40 points to the stock re-testing their recent lows at $35.00. The fact that their CEO just resigned (as noted yesterday) doesn’t paint a rosy picture.

PLAY: Buy the MNST November 40 Puts (BSQ WH) at or under $3.10, good for the day. Place a protective stop loss at $2.00.

PLAY#2: Starbucks (SBUX – NASDAQ)

SBUX

Also noted in yesterday’s report, SBUX is looking to move down and fill the enormous gap it just established five trading days ago. Let’s play them down as well:

PLAY: Buy the SBUX November 37.5 Puts (SQX WU) at or under $1.80, good for the day. Current bid/ask spread is $1.70 to $1.75. Place a protective stop loss at $1.00.

SPECULATIVE PLAY #3: Transocean (RIG – NYSE)

RIG

Finally, with oil prices officially dropping to yearly lows at $57.50 a barrel, we’re seeing big time weakness in the names that experienced upside gains yesterday. Looking at RIG, it looks like we’ll see a move back down to $65, although it could be choppy. Thus, I’m calling this one a more speculative trade.

PLAY: Buy the RIG November 65 Puts (RIG WM) at or under $2.70, good for the day. Current bid/ask spread is $2.50 to $2.65. Place a protective stop loss at $1.80.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From October 2006