Play DUG Puts

Quick Speculative Play

By Bryan Bottarelli
Tuesday, September 09, 2008 12:51 PM EDT
Tue, 9 Sep 2008 16:51:00 GMT

PLAY: Buy the DUG September 44 Puts (DUG UR) at or under $3.00, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $4.10.

Dear Bottarelli Research Member,

When it comes to the oil and energy sector, intra-day volatility over the last 6 weeks has been incredible. For example, morning pops give way to afternoon sell-offs. And vice versa. Day after day, these “rips and dips” have plagued the sector, which has sparked a good amount of the intense volatility. Keeping these large price swings in the back of our minds, let’s look at today’s price action on the UltraShort Oil & Gas ProShares (DUG – AMEX).

As you know, DUG has been another ultra-short position that we’ve played with a high degree of success. And as I look at the chart today, I think we’re getting an opportunity to play a quick pullback. Now remember, as an ultra-short position, the DUG moves up as oil and energy prices move down. And as you can see, this vehicle has blasted higher over the last six trading days — meaning that we’ve seen a sizable pullback in the oil/energy sector.

DUG

Based on this formation, we have the opportunity to play a quick pullback. And we’ll do this using September 44 Puts. All we need is a $1.00 to $2.00 reversal and we could have a nice gainer on our hands. Given the sector volatility, it could happen very quickly. So let’s get positioned now!

PLAY: Buy the DUG September 44 Puts (DUG UR) at or under $3.00, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $4.10.

At the same time, maintain your SDS September 69 Calls (SDS IQ) for more upside. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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