Your Wednesday Update

Plus, Hitting Some 100% Winners

Dear Bottarelli Research Member,

We’re once again witnessing a market that has set record highs in early trading action — only to fall off those high-water marks as the day progressed.

For most of the day, for example, we had gains on the Dow, gold, and oil — but all three have since reversed course and slipped into the negative. As I write, the NASDAQ is the only index trading in the green — and that’s primarily due to the gains on Cisco (CSCO – NASDAQ), but even they have given back a large chunk of their early-session gains — as you can see by today’s black candlestick formation.

So in short, we’re still hitting new highs — but then we’re also witnessing softening market conditions subsequent to reaching those high levels. And for that very reason, I’d still like to carry a balanced position of both calls and puts. A quick look at today’s trading action, and you’ll see why owning both calls and puts is tactically the best position to have right now.

Over on the call side, we’ve seen intra-day gains on all of our plays. Our RIG March 80 Calls (RIG CP), for example, traded as high as $2.45, our CHINA January 2008 7.5 Calls (WRW AU) traded as high as $4.50, and our CELG March 55 Calls (LQH CK) traded as high as $2.95. All three prices represent gains (or in CELG’s case, a break-even) based on our entry prices. Chart-wise, both RIG and CELG are on the verge of a break-out as soon as they can penetrate their 50-day moving averages — so as the markets continue to set new highs, it’s smart to maintain all of our upside calls.

At the same time, we’re also seeing movement in our puts. Our WBMD March 50 Puts (QWB OJ), for example, have traded as high as $4.20 and the PCU March 50 Puts (PCU OL) that I said I’d continue to follow are also coming back, as they’ve ticked up to $1.80 in today’s action. Chart-wise, perhaps this is now the top for PCU.

When you look at intra-day price moves like this — where you’re seeing gains on both your calls and your puts — it solidifies the tactical thesis of owning a position on both the call side and the put side. The trick is to use any intra-day strength and methodically begin taking your profits off the table as both our calls and puts hand us gains. As always, I’ll tell you when to execute this strategy when the timing is right. But for now, maintain all your positions.

Switching gears, I’ve been getting some positive feedback on the longer-dated and cheap option plays that I’ve been recommending — specifically the CHINA January 2008 7.5 Calls (WRW AU) that we’re still holding and the BBI January 2008 10 Calls (YCQ AB) that just hit a 37.5% gain. If you’re a new Bottarelli Research member, then you have yet to partake in any of our longer-dated option plays — but that’ll soon change. You see, these longer-dated positions are great because they give you more time to get positioned in the trades — and they also allow you more time to let the forecasted move take place, thus maximizing your overall profit potential.

So starting next week, I’m going to start issuing you a series of even more longer-dated plays — with the idea of each of these plays having 100% wining potential (perhaps even more).

The theory is to commit a small amount of capital to an option play that has plenty of time — and then simply sit back and let the natural market forces push these plays higher in the weeks and months that follow.

As I mentioned, I have a series of these candidates lined up — and I expect to have my due diligence complete and ready to roll next week. So stay tuned for these coming winners! And until then…

Lock and load!

Sincerely,