Add to DIA Puts

Plus: Hold DRYS Calls

By Bryan Bottarelli
Thursday, March 20, 2008 11:26 AM EDT
Thu, 20 Mar 2008 15:26:00 GMT

PLAY: Buy more DIA April 114 Puts (DIA PJ) at or under $1.10, good for the day.

Dear Bottarelli Research Member,

With the markets closed tomorrow for Good Friday, we’re getting a much-needed breather from this week’s incredible intra-day volatility. As I write you today, the Dow is trading higher by over 130 points, and this was the reason that I wanted to maintain some upsides exposure using our DRYS April 65 Calls (DQR DM). As you know, we entered these calls on March 18th for $4.66 per contract, and right now they’re trading between $3.30 and $3.60 per contract. That means we’re down from our original entry price, but as you’ve seen in the past, DRYS can move up rather quickly, so let’s continue to hold this position for more upside.

DRYS

At the same time, we’re also holding the put side of our DIA Strangle. Specifically, we’re holding the DIA April 114 Puts (DIA PJ) and looking for them to reach $2.13 for our basket to break into the profit zone. Yesterday, these puts traded as high as $1.50, which got us very close to achieving our desired profits. But with today’s market upside, these puts have fallen back down under $1.10 per contract. What I’d like to do here is ADD to these puts at current levels, which takes advantage of this upside move and puts us in position to further profit if the major market indices retrace back down next week. As you can see below, a DIA failure at the 50-day moving averages continues to point to market weakness, so let’s profit off this forthcoming weakness by adding to our DIA April puts now!

DIA

PLAY: Buy more DIA April 114 Puts (DIA PJ) at or under $1.10, good for the week. Do not place a sniper sell or stop loss on this play, as I’ll continue to follow if via our intra-day alerts.

By adding these puts, we’ve now lowered our break-even price on them to $1.62 per contract. In other words, all it’ll take is one aggressive selling day between now and April expiration and we should have a nice profit in our hands. Given the volatility we’ve seen lately, expecting such a move over the next month is certainly a realistic expectation. Aside from that, I don’t want to take on any new plays going into a three-day market holiday. Unless I see an opportunity for a super-quick intra-day trade, I will sign off for the week. Have a fantastic Easter Holiday and we’ll dive head-first into more profitable trading next week. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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