Two Plays to Kick Off the Week

Add SDS & CAT Calls

By Bryan Bottarelli
Monday, July 21, 2008 10:22 AM EDT
Mon, 21 Jul 2008 14:22:00 GMT

PLAY: Buy the SDS August 70 Calls (SDS HR) at or under $2.65, good for the day. Place a protective stop limit at $1.60 and a pre-determined sniper sell at $3.50.

PLAY: Buy the CAT August 70 Calls (CAT HN) at or under $4.30, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.60

Dear Bottarelli Research Member,

I’d like to kick off the week by adding two new call positions.

The first is another play on the Ultra Short S&P 500 ProShares (SDS), which could increase in value if the major market averages give up a little of their gains from last week. And the second is an upside play on Caterpillar (CAT – NYSE), who reports earnings tomorrow at 11:00 am ET.

Starting with the SDS, you can see that last week’s strength in the financial sector helped blast the markets higher — and this subsequently dropped the SDS from $75.00 down to $67.50 in a very short period of time. If we see any sort of financial profit-taking this week, the SDS could pop back up, and I’d like to be positioned to ride this pop using SDS August calls. So as the first trade of the day, let’s add these SDS August calls now!

SDS

PLAY: Buy the SDS August 70 Calls (SDS HR) at or under $2.65, good for the day. Place a protective stop limit at $1.60 and a pre-determined sniper sell at $3.50.

The second play is an upside position in CAT. As mentioned above, the global heavy machinery maker is set to report earnings tomorrow, and considering that earnings expectations have now been lowered across the board, any positive news out of CAT could set the tone for a bullish global viewpoint of our economy. News like this could easily move CAT shares higher. Therefore, as our second play on a reduced-earnings upside surprise, let’s add CAT August calls as well!

CAT

PLAY: Buy the CAT August 70 Calls (CAT HN) at or under $4.30, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.60.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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