Addressing the Volatility

How to Play Fast Moves

By Bryan Bottarelli
Wednesday, March 14, 2007 12:20 PM EDT
Wed, 14 Mar 2007 16:20:00 GMT

Dear Bottarelli Research Member,

It’s not even lunchtime and it’s already been an extremely volatile morning. As I write, the Dow just made a decisive move to the downside and is now trading 75 points lower. This should help us execute our sale price on the MRO April 95 Puts (MRO PS), so maintain that order good for the week.

MRO

PLAY: Sell your MRO April 95 Puts (MRO PS) at or above $5.00, good for the week.

But on the same hand, this down-move has triggered a stop on our Allegheny Technologies (ATI – NYSE).Perhaps I was unclear in the last alert — but I typically continue to follow plays that I feel still represent strong candidates going forward, and ATI fits that mold perfectly. As you can see by the chart, the stock is just about to re-test the 50-day moving average — which could serve as the next launch point for another move well into the mid-$100’s. Therefore, I may re-recommend calls doing out into May or June. But in the meantime, our ATI April 110 calls (ATI DX) are stopped at $1.90.

ATI

Also getting cheaper is our LMT June 100 Calls (LMT FT). Since this is a longer-dated position, I set a more lenient stop at $2.30 because I’d like to hold the position into any forthcoming market recovery. As you can see by the chart, the stock is grinding out support at the 50-day moving average — which makes me comfortable holding calls into June.

LMT

Also, our DIA April 121 Puts (DAW PQ) have now traded as high as $2.65, handing you a 32.5% gain overnight. If they calls tick up to $3.00, let’s go ahead and lock in our 50% profit.

PLAY: Sell your DIA April 121 Puts (DAW PQ) at or above $3.00, good for the day.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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