Play LM Puts

Re-Load the Put Ledger

By Bryan Bottarelli
Monday, March 10, 2008 12:03 PM EDT
Mon, 10 Mar 2008 16:03:00 GMT

PLAY: Buy the LM April 60 Puts (LM PZ) at or under $3.60, good for the day.

Dear Bottarelli Research Member,

The financial stocks are getting clobbered today, sparked by a new downgrade of Bear Stearns Companies (BSC — NYSE). In fact, most of today’s selling pressure is coming thanks to the weak financial group, as my screen is showing new 52-week lows across the board in every financial company I watch. Therefore, I’d like to ride this downside train using a company that’s not mentioned too much in the mainstream media (thus making their put premiums reasonable considering the severity of the downside move). That company is Legg Mason (LM – NYSE).

LM

As you can see from the chart below, the Baltimore-based management company is taking a sizable hit today, and all indications show that LM will extend upon this downside move. Therefore, let’s get positioned in a cheap April put play to profit off this move. Here’s the play:

PLAY: Buy the LM April 60 Puts (LM PZ) at or under $3.60, good for the day. Place a sniper sell at $4.40 and a protective stop limit at $2.40.

In terms of other market news, things keep getting worse and worse. The Dow has now traded down in 7 out of the last 8 sessions, and the NASDAQ is on pace to record its biggest quarterly drop since Q2 of 2002. Therefore, we must continue to be nimble in our trading, as the volatility will certainly continue to play a major intra-day factor. Adhere to our sniper-sell targets and we’ll continue to lock in quick gainers. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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