Add BHP Calls

Plus: Close X Puts

By Bryan Bottarelli
Friday, October 26, 2007 2:34 PM EDT
Fri, 26 Oct 2007 18:34:00 GMT

Dear Bottarelli Research Member,

Within the last hour, the markets have made a strong push to the upside, so it’s a smart idea to trim down on our current put positions. While I’d like to continue holding our NILE November 80 Puts (JWU WP), I feel it’s time to cut loose our United States Steel November 105 Puts (X WA). If you haven’t already done so, close this position at current levels.

At the same time, we have a very strong chart formation today in shares of BHP Billiton (BHP – NYSE) that warrants immediate trading action. As you can see, BHP is making a strong upside advance today that looks read to take out its recent high early next week. Let’s play this upside move using November calls!

BHP

PLAY: Buy the BHP November 85 Calls (BHP KQ) at or under $4.30, good for the day. Current bid/ask spread is $3.80 to $4.00. Place a protective stop limit at $2.10.

Also moving higher is our play from earlier this afternoon, Sotheby’s (BID – NYSE).Shortly after issuing this trade, the BID November 55 Calls (BID KK) quickly jumped up to $3.70 and $3.80 per contract. Since a good majority of members entered at these levels, I’ll be using $3.80 and the entry price in our model portfolio.

BID

Now remember, on a fast-moving trade like this, I’m ok with you paying $0.10, $0.20, or even $0.30 higher than our listed entry price just to get into the trade. But don’t chase prices too much higher than this. After all, we want to walk that fine line between catching a nice upside mover and not over-paying for near-term momentum. As I write, the BID November 55 Calls (BID KK) have traded as high as $4.50, good for an 18% gain above our heightened but prices, so it looks like we made the right move. Continue to hold for more upside. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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