Extreme Volatility

Whip-Saw Action to Close the Day

By Bryan Bottarelli
Tuesday, January 08, 2008 3:41 PM EST
Tue, 8 Jan 2008 20:41:00 GMT

Dear Bottarelli Research Member,

The last half hour has been an absolute whipsaw unlike anything I’ve seen in recent memory. In the blink of an eye, our Mastercard January 210 Calls (MAL AB) turned an 18% gain into a stop out — then quickly bounced back above these prices — all as the markets made a sharp and decisive move to the downside. It’s just too volatile here, so let’s close out these MA calls now. In fact, take a quick look at the current Dow chart formation, and you’ll agree that it isn’t pretty:

INDU

As the Dow moves below its November 2007 support level, it pains me to say that things could get really ugly here, especially if everyone on the floor knows that any upside move will be quickly decimated by the bears. As a result, we’re left with no choice but to maintain downside put positions, so continue to hold your DECK January 130 Puts (QUK MF) and your UNP January 120 Puts (UNP MD). Any carry-on weakness could really turn these two into big winners for us, so let’s do our best to use this downside momentum to our advantage. Until further notice, the tactical strategy will be shorting any rally, so maintain your puts and we’ll look to lock in gains on follow-through weakness tomorrow. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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