Play RIMM Puts

A Quick Downside Play

By Bryan Bottarelli
Tuesday, December 11, 2007 3:29 PM EST
Tue, 11 Dec 2007 20:29:00 GMT

Dear Bottarelli Research Member,

The markets are taking a turn for the worse. Over the last hour, the selling pressure has escalated, which has now pushed the Dow underneath the support point found at its 50-day moving average.

INDU

Things look equally troubling for the NASDAQ, as today’s red tick represents a major failure at the critical 50-day moving average. Check it out:

COMPQ

This leads me to believe that we’ll see more selling into tomorrow, and that’s why I’d like to immediately add calls on Research In Motion (RIMM – NASDAQ). As you know, RIMM has been a tech standout all year long, but with the stock sitting below its 50-day moving average in the middle of a deteriorating market, RIMM could really sell off hard. Therefore, let’s play this weakness using December puts. Here’s the play:

RIMM

PLAY: Buy the RIMM December 100 Puts (RUL XT) at or under $7.40, good for the day. Current bid/ask spread is $7.10 to $7.15. Place a protective stop limit at $3.70.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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