Do I Trust It? No. Will We Profit Off It? Yes.

Add Two New Calls & One New Put

By Bryan Bottarelli
Thursday, March 08, 2007 11:41 AM EST
Thu, 8 Mar 2007 16:41:00 GMT

Dear Bottarelli Research Member,

I’m not going to lie: I don’t trust today’s upside action.

But of course, just because I don’t like it doesn’t mean that I won’t find ways to profit off it. So in today’s alert, I’d like to continue the strategy that we’ve been using on plays like VLO, and offer you two new upside call positions in stocks that I feel have continued upside potential. By playing longer-dated expirations, we’ll give ourselves the cushion to add to any of these positions on dips and still feel comfortable holding over an extended time horizon.

DIA

At the same time, I’d also like to add a new downside put into the mix. After all, I still think we must re-test last week’s lows before making any significant upside move — but this re-test may not happen for a few weeks. So in cases like this, I like to isolate a stock that’s been under-performing the recent moves of the broad-based markets — and I’ve found that perfect opportunity today. So let’s get right into it!

Let’s begin with NASDAQ Stock Market (NDAQ – NASDAQ).

NDAQ

As I’ve said in past alerts, the publicly traded stock exchanges are a big beneficiary of the exploding trading volume that comes with increased volatility — and NDAQ offers us the biggest bang for our buck.

It appears like the stock has hammered out a near-term bottom below the $28 level, which sets up a bounce-back move up to at least the $32 level in the next 15 to 30 days. The best way to play this move comes in the form of the NDAQ June 30 Calls (NDQ FF). Currently trading between $2.10 and $2.20 per contract, a move up to $32 could mean an easy double. So let’s get positioned now — with the possibility of adding to the position on any dips.

PLAY: Buy the NDAQ June 30 Calls (NDQ FF) at or under $2.35, good for the day. Place a protective stop loss at $0.90.

Next up is an interesting company called America Movil S.A.B. de C.V. (AMX – NYSE), which is a wireless communications server based primarily in Latin America. Not too many people know about AMX, which makes the options string nice and cheap, and the chart today is offering us an interesting signal.

AMX

As you can see, the stock has just experienced a downside gap that vacates a hole between the $45 and $46.50 level — and the odds are strong that AMX will attempt to fill this gap over the next 30 trading days. The best way to profit off this move comes in the form of the AMX April 45 Calls (AMX DI). Currently trading between $1.20 and $1.25, these calls offer you a nice, cheap way to play any coming upside in AMX. Once again, we could be seeing an easy double if AMX rallies as we expect, so let’s add this position to our ledger as well.

PLAY: Buy the AMX April 45 Calls (AMX DI) at or under $1.35, good for the day. Place a protective stop loss at $0.60.

And finally, let’s establish a downside put position on American International Group (AIG – NYSE).As you can clearly see, the insurance giant has been unable to penetrate the $70 level on five (5) recent occasions — which signals an exhausted bull. This, of course, could lead to a quick downside move and I’d like to take full advantage.

AIG

PLAY: Buy the AIG April 70 Puts (AIG PN) at or under $1.45, good for the day. Place a protective stop loss at $0.70.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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