Add Puts on BNI

Plus, Add FDG Calls

By Bryan Bottarelli
Thursday, March 27, 2008 2:27 PM EDT
Thu, 27 Mar 2008 18:27:00 GMT

Dear Bottarelli Research Member,

While we continue to work our $3.70 sell order on the COF April 50 Puts (COF PJ), I think it’s a smart idea to add cheap puts on the very small group of stocks that have been holding up amazingly well here in 2008: That group consists of the Dow Transports.

If you’re a Dow Theory disciple, then you closely monitor the movements of the Industrials and the Transports (*Quick side note: I read an interesting article recently that argued that the Baltic Dry Index should now replace the Dow Transportation index when studying the merits of Dow Theory. It made a persuasive case about why the Baltic Dry Index would be a more accurate representation of the global economy, thus better judging the effectiveness of Dow Theory. But I’ll leave that discussion is for another day and time).

In terms of today’s alert, we have a quick opportunity to add cheap puts on Burlington Northern Santa Fe (BNI – NYSE). As you can see from the chart, BNI has been very strong in recent months, but now the shares could be getting set to take a slight breather. If the markets open weaker tomorrow, we could see some carry-over effect in BNI shares, so it makes sense to add a cheap April put play on BNI now.

BNI

PLAY: Buy the BNI April 90 Put (BNI PR) at or under $1.90, good for the day. Place a protective stop limit at $1.20 and a sniper sell order at $2.35.

At the same time, in an effort to balance out our ledger, I’d like to make an upside call play on Fording Canadian Coal Trust (FDG – NYSE). As I’ve noted before, Fording Canadian Coal Trust operates as an open-ended mutual fund in Canada that owns interests in coal producing properties that mine and sell hard coking coal (which is a type of metallurgical coal used for making steel). As you can see from the chart below, FDG has been a model of upside consistency in 2008, and I’d like to ride this upside into April using a new call play.

FDG

PLAY: Buy the FDG April 55 Calls (FDG DK) at or under $2.50, good for the day. Place a protective stop limit at $1.80 and a sniper sell order at $3.10.

Also noteworthy is our old friend Apollo Group (APOL – NASDAQ).

APOL

As you know, we’ve successfully played puts on APOL before, and the online education company is trading lower leading into tonight’s earnings report. While I’m not willing to officially make a new put recommendation, I would imagine that the April 55 Puts (OAQ PK) would explode to the upside if APOL reports numbers that disappoint Wall Street. So if you’re a true speculator at heart, feel free to use this information in any way you see fit. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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