Kick Off the Week With Profits

Take PTR Profits!

By Bryan Bottarelli
Monday, March 05, 2007 9:39 AM EST
Mon, 5 Mar 2007 14:39:00 GMT

Dear Bottarelli Research Member,

As we look to kick off the first trading week after one of the most violent sell-offs in the last 3 years, there’s plenty of talk about what direction the market is headed next. So consider this important statistic:

There have been 38 times since 1979 that the S&P 500 has suffered a single-session loss of 3% or more — and the average gain in the ensuing 60 days has been 6.9%, with the index rising in 31 of the 38 cases.

When you read this, you may consider adding a lot of longer-dated calls. But I don’t think the selling pressure is over. At least not yet. As I’ve reported in past alerts, the past four market corrections have all extended longer and lower than the current down-move we’re witnessing now, so the smart course of action is to over-emphasize the put side of the ledger in the short term, while carefully adding a select few longer-dated call positions. But this morning, all the action could come from our puts — and specifically our PTR April 110 Puts (PTR PB). As I write, PetroChina (PTR – NYSE) has opened the day $4.00 lower, which has helped our puts trade as high a $5.80. I’d like to take full advantage, so let’s lock in our profits now!

PLAY: Sell your PTR April 110 Puts (PTR PB) at or above $5.50, good for the day.

Also moving higher is the second half of our DIA March 126 Puts (DAW OV). They’ve traded as high as $5.90 today, and I’d consider selling them anywhere above the $6.00 level. Consider this a standing order, good for the week:

PLAY: Sell the second half of your DIA March 126 Puts (DAW OV) at or above $6.00, good for the week.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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