Add WB Puts

Increase Financial Downside Exposure

By Bryan Bottarelli
Thursday, August 28, 2008 10:18 AM EDT
Thu, 28 Aug 2008 14:18:00 GMT

PLAY: Buy more WB September 15 Puts (WB UC) at or under $1.60, good for the day. Lower your protective stop limit to $0.80.

Dear Bottarelli Research Member,

The major market averages are opening to the upside — which is surprising considering that oil and gold have opened higher as well. Typically, we’ve seen a reverse correlation between oil prices and the major market averages (where one is up while the other is down), but today both are rallying in unison.

This seemingly odd pattern has brought about more choppy trading in our positions, with specific emphasis on Sears Holdings (SHLD – NASDAQ). This morning, SHLD reported that their Q2 net income dropped to $65 million ($0.50 cents a share) from $173 million ($1.15 a share) one year ago. On an adjusted basis, earnings totaled $0.21 cents a share, which was well below the $0.28 cents expected by analysts. But strangely enough, the stock hasn’t made much of a reaction whatsoever. See below:

SHLD

Typically, a missed earnings expectation would push a stock price lower, especially in this market! But for whatever reason, SHLD is plodding about right under the $90.00 level. I still feel the stock has $10.00 to move down, so maintain your SHLD September 85 Puts (KTQ UQ) to capitalize on this “delayed” downside reaction.

Next up is our FCX September 90 Calls (FCX IR), which we entered yesterday for $5.45 per contract. These calls have traded as high as $6.25 today, good for a quick 15% gainer. But looking at the chart below, I still feel FCX has room to run. Maintain your calls for further upside.

FCX

The same goes for our BG September 90 Calls (BG IR). Although BG is drifting lower today, the chart indicates that an aggressive upside move could occur at anytime. $90.00 has proven itself as the stock’s floor, so hold your calls to capitalize on this coming pop.

BG

Switching over to our puts, it’s time to add to our WB September 15 Puts (WB UC). As you can see, today’s market upside is helping to push WB right back to its 50-day moving average, and I feel this level will once again fail. Therefore, let’s capitalize on today’s up-tick as a prime shorting opportunity. Add more September 15 puts now!

WB

PLAY: Buy more WB September 15 Puts (WB UC) at or under $1.60, good for the day. Lower your protective stop limit to $0.80.

And finally, maintain both of your “aggressive” positions in the ACI September 55 Puts (ACI UK) and the MOS September 110 Calls (MOS IY). We’ll look to lock in profits on any forthcoming directional moves.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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