Kicking Off December

FXI, LEH & MICC All Moving Our Way

By Bryan Bottarelli
Monday, December 03, 2007 10:06 AM EST
Mon, 3 Dec 2007 15:06:00 GMT

Dear Bottarelli Research Member,

As we kick off the first trading day in December, I’d like to share with you some of my general market observations. As you know, on a historical basis, December ranks as the second best month of the year to be long. But coming off a 700-point rally last week, it would appear that the markets are due to for a breather. Take a look at today’s Dow chart, and you can see just how quickly we made up 700 points last week.

INDU

After such an impassive week, many investors probably feel that it’s time to buy. In fact, all of the locals at my neighborhood Starbucks have all been telling me the same thing: “Bryan, I think we’ve survived. We’re going higher.”

When I hear comments like this, I always take a skeptical approach. That’s why we’re currently holding our FXI December 180 Puts (FVU XX) and our LEH December 60 Puts (LES XL). Both of these contracts offer us the downside exposure that we need to profit off any near-term market corrections.

Keep in mind, it was only last Monday that witnessed the Dow fall over 200 points, and all it’ll take is another market “scare” to begin this selling pressure once again. As we open up the trading day, your LEH puts are on the verge of breaking into profitability and your FXI puts have already opened the day in the black, so continue to maintain each put position.

On the same hand, I also want to maintain upside exposure using the MICC December 125 Calls (CQD LE).We entered these calls last Friday for $5.30 and they’ve traded as high as $6.30 in today’s action. I still think MICC is about to make a push towards a new 52-week high, so let’s continue to hold this position for more upside.

MICC

I’m sure that I’ll isolate some new trading opportunities as the day progresses, but for now, I’d like to see how the morning action plays out. So hang tight, and as soon as some new trading action is warranted, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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