Dow Drops 700

The Bloodbath Is On: Hold DIA Straddle

By Bryan Bottarelli
Monday, September 29, 2008 2:58 PM EDT
Mon, 29 Sep 2008 18:58:00 GMT

Dear Bottarelli Research Member,

On Thursday, September 18th, I wrote to you about a scary thought that jumped into my mind. On this day, I asked,

“Are we setting up for a 1,000-point down-day on the Dow? Yes, losing 1,000 points in one single trading session is certainly a scary idea. But I have to be honest and realistic with you. If there was ever a time where a 1,000-point down-move could happen, it’s right now. Therefore, I want to take every precaution that we can to not only protect against a move of this magnitude, but also to profit off such a move”

As I write you today, the Dow has dropped 700 points (on an intra-day basis). Virtually every stock on my screen is at a new 52-week low. But more importantly, the decision to hold onto the put side of our “political straddle” position was right on the money. As I write, the DIA October 110 Puts have traded as high as $7.45 per contract. Considering that we entered the calls and the puts for a total of $7.05, this one side of the position has now brought the entire basket into the profit zone. And looking at the chart below, a failure at the 10,500 level would push the Dow even lower. Therefore, let’s continue holding the entire DIA Political Straddle for more gains. Like I mentioned before, this is probably the one and only position right now (aside from gold and consumer staples plays like KMB) that make sense.

INDU

As always, I’ll be here to guide you through this turmoil. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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