A Speculative Put Play
Add FXI Puts
Dear Bottarelli Research Member,
The Bernanke comments are already beginning to fade, and this has trimmed the Dow’s 140-point morning advance in half. If we should witness an end-of-week sell off, which could very well happen, I’d like to offer one new put to the speculative crowd. If you hae a little more appetite for risk, then I’d like to go ahead and add puts on the iShares FTSE/Xinhua China 25 Index (FXI – NYSE).
As you know, we’ve played FXI puts before, which offers us downside exposure to companies like China Life, China Mobile, CNOCC, and PetroChina. As you can see by the chart, the FXI today is putting in a bearish candlestick formation right at its 50-day moving average. The last time the FXI failed at the 50-day MA, it fell from $190 down to $165 over 5 trading days. If you think that the markets could give back some of their recent gains — either today or early next week — then adding these FXI puts will be a good play at these levels. If you’d like to speculate alongside me, then here is the trade:
PLAY: Buy the FXI December 180 Puts (FVU XX) at or under $6.90, good for the day. Current bid/ask spread is $6.20 to $6.70. Place a protective stop limit at $3.20.
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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