RIG Profits Getting Close

Prepare to Lock in Sniper Gains

By Bryan Bottarelli
Thursday, January 17, 2008 12:08 PM EST
Thu, 17 Jan 2008 17:08:00 GMT

Dear Bottarelli Research Member,

The markets are a complete disaster. The Dow is at a 9-month low. The NASDAQ is at a 10-month low. And the S&P 500 and Russell 2000 have hit new 52-week lows. Like I mentioned earlier this morning, things are getting ugly — especially when you have a classic Head and Shoulders formation on the Dow. Thankfully, options traders like us have the flexibility to play puts and profit off this downside selling pressure — and that’s exactly what I plan to do.

We already locked in gains on our APA February 100 Puts (APA NT) this morning — and the stock has continued to fall. If you have yet to lock in your APA put gains, they’ve just traded as high as $6.30, good for a 40% gain off yesterday’s entry price. Lock in this gain now!

At the same time, our RIG February 125 Put (RIG NE) are now showing a profit. They’ve traded as high as $5.50 in today’s trading, good for a 12% gainer. Be sure to lock in gains once you reach the 15% to 20% level. If this selling pressure really gets going, we could hit these levels very quickly.

I also think it’s important that we maintain our upside exposure, so let’s go ahead and cancel our stop loss order on our GILD February 50 Calls (GDQ BJ). These calls are so cheap, let’s put them in our back pocket in anticipation of a market pop that takes the shorts by surprise. Remember, whispers of a major market stimulant are gaining traction, so it’s worth it for us to own a cheap call that’ll blast if/when something is announced.

Also, I had many of you ask me why I haven’t been playing calls on POT or MOS. Well, I hope that these two charts answer that question:

POT

MOS

Sometimes NOT making a play is the best trading decision. And as you can see, both agriculture plays have gotten brow-beaten over the last three days — and this could set up a strong call-buying opportunity when the selling reaches its climax. But the timing isn’t right yet. Let these names fall, and we can always pick them up for much cheaper later on. So for now, lock in your RIG put gains — let the markets continue to fall — and we’ll sort everything else out in due time. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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