DIA Puts: Maintain Your Protection!

Plus Revisiting HAS, FLML, CAL, ANF, and GS

Dear Bottarelli Research Member,

I’d like to quickly re-visit some of our latest plays, as many of the directional moves are happening as predicted. But first I’d like to point out that ten minutes into today’s trading, the Dow surrendered the 12,000 level and traded at 11,997.25. This pullback is something I’ve been expecting for weeks, and it’s why we continue to hold our position in the DIA November 120 Puts (DAW WP). With an average entry price of $0.98, these puts traded as high as $1.20 today, handing you a 22.44% protective gainer. Hold for more profits.

Although we took profits yesterday, our upside play in Hasbro (HAS – NYSE) continues to look strong. The HAS January 25 Calls (HAS AE) that we entered for $1.75 traded as high as $2.40, which is a nice 37.14% gain. The early indication is that Hasbro’s TMX Elmo (as in “tickle me extreme") will repeat the buying frenzy that came with Hasbro’s 1996 sensation Tickle Me Elmo. If you haven’t already done so, take profits on your HAS calls.

Also continuing to shoot higher is Flamel (FLML – NASDAQ) on the news that their total revenues came in at $5.4 million compared to $3.1 million in the third quarter of 2005. On the news, FLML is rocketing to a new 52-week high, pushing the FLML December 20 Calls (FLU LD) that we entered for $4.50 up to $6.40. Again, if you have yet to sell these calls, take your profits now!

Over on the put side, Continental Airlines (CAL – NYSE) is finally falling like I had expected a week ago. The world’s #4 U.S. carrier said yesterday that their load factor (which is the percentage of seats filled by paying passengers) rose 2% from a year ago to 79.3%. While this is good news, CAL stock is experiencing a “sell on news” situation which has moved our CAL December 35 Puts (CAL XG) back above our $2.25 entry price. Although we closed the position, be sure to take any gains if you’re still in.

Another big down-mover today is Abercrombie & Fitch (ANF – NYSE), as the trendy teen retailer said this morning that sales at stores open at least a year fell 3% in October. The stock is down over $2.00 on the news, which could set up a prime second entry opportunity for our ANF December 80 Calls (ANF LP). As you can see, the stock is finding support right at the 50-day moving average, as I noted yesterday. Wait for the signal.

And finally, our speculative GS November 200 Calls (GPY KT) have hit our $0.50 stop. At this time yesterday, we were one up-tick away from taking our profits — but then GS began to move lower on the day subsequently triggering our protective stop loss. Although our trade that added onto the position was well-timed, GS just couldn’t give us enough upside to take full advantage, so let’s close this speculative play, at least for now.

As the trading day progresses we could have some new trading opportunities (as I’m considering calls on CAT and an oil play like RIG) so stay prepared for that. And as always…

Lock and load!

Sincerely,