Take FXI Profits

Lock in Overnight Gainer

By Bryan Bottarelli
Thursday, December 13, 2007 9:35 AM EST
Thu, 13 Dec 2007 14:35:00 GMT

Dear Bottarelli Research Member,

After the Fed called on the BOE, the Swiss Bank, and the European Union to benefit U.S. banks by injecting liquidity into the system, it got me thinking about a rather disturbing trend that we’ve been seeing lately. You see, it appears like the banks listed above are (temporarily) coming to the rescue of the U.S. markets. And this isn’t an isolated case.

INDU

Citigroup (C – NYSE) had to be bailed by Saudi money. And UBS recently received a cash infusion from a Middle Eastern investment group that remained un-named. This trend of calling on foreign money to serve as a band-aid to our system does not sit well with me, and it could have troubling effects on the U.S. markets. The Dow, for example, is in a dangerous position of breaking underneath its 200-day moving average, which if ruptured, could once again lead to a re-test of the late-November lows of 12,800.

This is a good reason why I added puts on the iShares FTSE/Xinhua China 25 Index (FXI – NYSE). As you know, we entered the FXI December 180 Puts (FVU XX) yesterday for $6.30 and a rather volatile close pushed their prices all over the map. But this morning, the FXI opened the day down $8.50, and this has pushed these calls all the way up to $10.70. Prices are now ticking back down, so let’s go ahead and lock in our profits now!

PLAY: Sell your FXI December 180 Puts (FVU XX) at or above $7.60, good for the day.

Now that we’ve closed out this FXI put play, I’d like to replace it with another new put. So as always, I’ll be on the lookout for new trading opportunities — and the moment it’s time to act, you’ll be the first to know. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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