Trimming Down In Advance of the Fed

Take NVDA & AGU Profits

By Bryan Bottarelli
Wednesday, April 30, 2008 1:59 PM EDT
Wed, 30 Apr 2008 17:59:00 GMT

PLAY: Sell your AGU May 80 Puts (AGU QP) at or above $5.50, good for the day.

PLAY: Sell the second half of your NVDA June 20 Calls (UVA FD) at or above $2.05, good for the day.

Dear Bottarelli Research Member,

We have a rather interesting market situation leading into the upcoming Fed announcement. On one hand, we have a Dow that’s up 123-points leading into this announcement. But on the other hand, despite this broad-based rally, our two put positions on AGU and CLF have reversed course and are now moving lower — thus helping our CLF May 145 Puts (CGJ QI) and our AGU May 80 Puts (AGU QP) move back above our original entry prices. Looking at our AGU puts, they’ve traded as high as $5.80 in today’s session, good for a one-day gain of 11%. While this certainly isn’t a home-run winner, I think it’s a smart play to lock in any gains in advance of the Fed meeting. So in that spirit, let’s take the cautions and safe approach and take our slight profits off the table now.

PLAY: Sell your AGU May 80 Puts (AGU QP) at or above $5.50, good for the day.

Also, I never like to see big moves leading into a Fed announcement, especially one that’ll elicit so much interpretation. So in an effort to trim down our exposure, let’s go ahead and lock profits on the second half of our NVDA June 20 Calls (UVA FD).If you recall, we entered these calls on 4/21 for $1.60 and they’ve traded as high as $2.10 in today’s action. That’s good for a 31% gainer, so let’s lock in these profits as well.

PLAY: Sell the second half of your NVDA June 20 Calls (UVA FD) at or above $2.05, good for the day.

These two sells will leave us holding our speculative CLF May 145 Puts (CGJ QI), theABX June 42.5 Calls (ABX FV), and the SPY May 140 Puts (SFB QJ).Should the speculative CLF puts trade anywhere at or above $4.50, don’t wait for my signal — lock in your profits!

Since I’d like to play a turnaround on ABX into May, continue to maintain this position. And since the SPY puts offer us broad-based protection against a pending market sell-off, let’s maintain this position into the Fed announcement as well.

And from here, we’ll sit back and see how the market reacts to the upcoming news.

Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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