Some Trading “Tricks” for Halloween

Looking at MRO, ADM, GS, CAT & YHOO

Dear Bottarelli Research Member,

It’s only 11:13 Central Time yet it’s already been a wild day in the oil sector. December crude prices fell $1.40 to $59.35 a barrel this morning, setting their lowest level since last Tuesday. This pushed virtually all the oil names down, and allowed us to get filled on our MRO November 85 Puts (MRO WQ).Shortly after getting filled, MRO jumped back up and was then trading in the green before once again falling back down into the red.

With volatility like this, the idea of taking our profits off the table leading up to Marathon’s Q3 earnings report tomorrow makes the most sense. According to consensus estimates, MRO is slated to earn $3.63 per share versus $2.16 per share one year ago. Given the earnings reaction of companies like Chevron (CVX – NYSE) and Exxon (XOM – NYSE), I’m comfortable forgoing potentially larger profits to lock in an early session gains today. If you have yet to get filled, maintain your sell order at or above $2.50 on the MRO November 85 Puts (MRO WQ).

Also in this morning’s alert, I alluded to some “goodies” that I had lined up for today’s trading. Some Charter Members asked me for more earnings-related plays, so one of those “goodies” comes courtesy of Archer Daniels Midland (ADM – NYSE).The world’s top corn, soybean, cottonseed, and sunflower seed company is set to report their Q1 2007 earnings tomorrow starting at 9:00 am EST. According to the consensus estimates, ADM is expected to earn $0.55 versus $0.32 this time last year. That’s quite an improvement.

Looking at the chart, ADM had a strong three-day run before falling over the last two trading sessions, which could present us with an opportunity to add speculative ADM calls to our ledger. If Wall Street embraces ADM’s numbers tomorrow morning, we could have a nice winner on our hands. Even better, if ADM rallies into the close of trading today, we could even take a quick gainer off the table prior to earnings. Either way, here’s the trade:

PLAY: Buy the ADM November 35 Calls (ADM KG) at or under $4.20, good for the day. Current bid/ask spread is $3.90 to $4.10. Place a protective stop loss at $3.00.

I’d also like to get aggressive on Goldman Sachs (GS – NYSE).If you’ve know me for a while, then you know that I occasionally like to swing for the fences given the right opportunity. Today, I think it’s worth the added risk to pony up and add to our super-speculative position in the Goldman Sachs November 200 Calls (GPY KT).

As I noted previously, buying any dips in GS has been the recipe for success over the last two months. And if you look at today’s chart, you’ll notice a dip from last Friday has continued into today, which means we could have a prime opportunity to speculate on my predicted run to the $200 level.

SPECULATIVE PLAY: Buy more Goldman Sachs November 200 Calls (GPY KT) at market. Current bid/ask spread is $0.80 to $0.85. Lower your protective stop loss to $0.35.

In terms of longer-dated plays (which some Charter Members have been asking for) I’m still following the movements in Caterpillar January 65 Calls (CAT AM).These calls have once again come down to a desirable entry level between $1.40 and $1.50, so we may be getting close to making this play.

Also on the radar is Yahoo.com (YHOO – NASDAQ). When you look at all the upside Google (GOOG – NASDAQ) has enjoyed lately, it’s fair to say that those gains came at the mercy of YHOO, which has been absolutely destroyed by Wall Street despite their very strong search engine presence.

As a pure value play, I’m monitoring the YHOO April 25 Calls (YHQ DE), currently trading between $3.50 and $3.60, as a potential longer-dated opportunity. When it’s time to act, you’ll be the first to know. Until then…

Lock and load!

Sincerely,