Add NILE Puts

Increase Downside Bias

By Bryan Bottarelli
Tuesday, February 19, 2008 11:32 AM EST
Tue, 19 Feb 2008 16:32:00 GMT

PLAY: Buy the NILE March 40 Puts (JWU OH) at or under $2.70, good for the day.

Dear Bottarelli Research Member,

With our trading ledger currently balanced with one call and one put, I’d like to take a quick moment to move the bias over to the downside — and we’ll do this by adding a new March put on shares of Blue Nile (NILE – NASDAQ).

NILE

As you probably know, NILE is an online jewelry retailer who just warned about future earnings, which makes perfect sense in a recessionary environment. As you can see, the stock has been stuck in a powerful downtrend, and today’s action (combined with weak market internals) indicates that share prices will push below $40.00 in this week’s action. Therefore, let’s use this downside forecast to add cheap March put contracts. Here’s the play:

PLAY: Buy the NILE March 40 Puts (JWU OH) at or under $2.70, good for the day. Place a protective stop limit at $1.20. Plan to “sniper sell” these puts if they trade at or above $3.30.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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