Add DUG Calls

Plus: Position Update

By Bryan Bottarelli
Tuesday, September 23, 2008 10:39 AM EDT
Tue, 23 Sep 2008 14:39:00 GMT

“Wall Street was hit hard Monday when Lehman Brothers filed for bankruptcy, Merrill Lynch was sold to Bank of America, and insurance giant AIG neared a collapse of its own. Basically, if your commercials aired during golf tournaments, you’re done.”

- Amy Poehler on Saturday Night Live, September 20th 2008

PLAY: Buy the DUG October 35 Calls (DUG JI) at or under $3.90, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.00

Dear Bottarelli Research Member,

In a rather shocking move, the major market averages are opening the session without a 300-point move up (or down). After the last two weeks, today’s 100-point upside move seems like a Sunday walk in the park. So while we have a moment, I thought I’d inject a bit of humor into today’s morning alert via the quote above.

With all the negativity lately, it’s important to maintain a strong level of mental health, and humor is often times the best answer. So in that spirit, I hope the quote above gives you a chuckle. I thought it was funny, at least!

Now back to business. The decision to close out our SDS October 71 Calls (SBJ JS) was indeed the correct move, as the Dow has opened with a 100-point move to the upside (noted below).

INDU

This upside is helping out our KMB October 65 Calls (KMB JM) and our TSO October 20 Calls (TSO JD), which is exactly the reason why we’ve maintained both positions. TSO is really fighting hard to establish support at the 50-day moving average, so continue to hold each play for more upside.

TSO

On the other hand, we’ve getting a slight pullback in our two “protective” positions, as early-session weakness has pushed our GLD October 87 Calls (GLD JI) and our DBA November 33 Calls (DBA KG) back down to our original entry prices. As you noticed yesterday, both of these plays offer a tremendous amount of downside protection, so let’s be sure to maintain both plays. I have a feeling that if Congress cannot get something done by Friday, we could be in for a big-time panic sell-off, which could spark a new inflow of money into gold and soft commodities. Hold.

GLD

In terms of today’s newest trade, I’d like to add even more protection by playing calls on the Ultra Short Oil & Gas Pro Shares (DUG – AMEX). As you probably know, the DUG moves at a rate of twice the inverse of the Dow Jones U.S. Oil & Gas index, and from a chart perspective, shares of DUG are due for an upside pop. Therefore, let’s add October calls now!

DUG

PLAY: Buy the DUG October 35 Calls (DUG JI) at or under $3.90, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.00.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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