Political Straddle, Part II

This Time, Play DXD!

PLAY: Buy DXD October 65 Calls (DXD JM) and DXD October 65 Puts (DXD VM).

Dear Bottarelli Research Member,

This morning, non-farm payrolls dropped 159,000, representing the biggest drop in 5 ½ years. Quite simply, the U.S. economy is flat out awful.

As much as I hate to admit it, the market simply needs the bailout package to pass. If it does pass, I think we’ll get a temporary upside move (somewhere in the area of 500 to 700 points higher) followed by another downside move. But in my view, this scenario will not push the Dow lower than 10,500. Therefore, we’ll exchange 700-point up and 700-point down moves for a few weeks before things get sorted out.

On the flipside, if the bailout package does not pass, we could be in for the crushing 1,000 point down-day that I’ve been alluding to in prior alerts. Dow 8,000 could be a realistic price target. Considering today’s payroll number, I think the politicians have no choice but to get this bill passed. Therefore, I would give the above scenario greater odds than the 1,000-point downside scenario.

Either way, we once again have a situation that will spark substantial market volatility. Therefore, on the eve of the second go-around of the bailout plan, I think it’s once again time to hop on board a Dow Political Straddle position. But this time, I’d like to up the ante and play the UltraShort Dow 30 ProShares (DXD).

As I’m sure you know, the DXD seeks daily investment results which correspond to twice the inverse of the daily performance of the Dow Jones Industrial Average index. Therefore, any market move is multiplied by two. If the Dow rallies 3%, the DXD moves down 6%. If the Dow falls 3%, the DXD moves up 6%. Therefore, adding a straddle on the DXD will give us twice the movement of our last DIA straddle play, thus super-charging our profit potential. So as toady’s first order of business, let’s go ahead and add a new DXD October straddle position now!

PLAY: Buy the DXD October 65 Straddle. This entails buying equal amounts of DXD October 65 Calls (DXD JM) and DXD October 65 Puts (DXD VM). The total cost of this position will be around $9.30. Hold both the calls and the puts without setting any pre-determined stops or sniper sells. Just like last time, I’ll manage this position within our daily trading alerts.

At the same time, continue to hold your WFT January 20 Calls (WFT AD) and the second half of your ICE October 85 Calls (ICE JQ). Both positions are profitable today, but I’d like to maximize our returns in the best way that I can. If we need to lock in any profits, you’ll be the first to know. For now, maintain each position. But first, let me quickly get back to the DXD.

*NOTE: My mom has been worried about her stock portfolio, so I recommended that she move 10% of her assets into the DXD. That way, she has protection against a major market downside move, while at the same time, still owns 90% of her long positions. Truth be told, I’ve been telling her to do this all year long. But her financial planner always advised against it. “Stay the course,” she told her. “Things will bounce back soon.” Well guess what? This stagnant advice just wasn’t working, so my mom finally moved into the DXD last week. And guess what? She’s already up 10% on her position (thanks to a 7% up-move yesterday). In short, she’s thrilled.

It absolutely astounds me that 99% of today’s financial planners have no clue how to properly position a portfolio for today’s volatile marketplace. “Buy and hold” is dead in the water. After all, you take 4-5 years to make a nice return, and then it takes 8 months to lose it all (and actually go into the red!). Do not be fooled: It’s a trader’s market, pure and simple. You can either accept it (and trade!) or fight against it (and lose money!). Since you’re a Bottarelli Research member, I already know which choice you’ve made. Kudos! I just wish more investors would say “enough!” and ditch their financial planners and follow our lead into the trading game. As you can tell, I can go on for hours on this subject. But I’ll get off my soapbox and turn your attention to an important follow-up note about our newest small-cap pick. See below:

TINY STOCKS, BIG RETURNS, PART II

Later this afternoon, I’ll be sending out my latest small-cap recommendation — and you don’t want to miss today’s powerful new selection. You see, thanks to new advances in “Horizontal” drilling technology, this tiny company could be on the verge of unlocking 6 trillion cubic feet of domestic natural gas. That’s worth $19.00 in upside potential, making this play an easy double from current levels!

Not only that, but you also have comfort in knowing that whoever takes office in November, they’ll fully support the biggest push towards natural gas in our lifetime. No matter if we’re in a bull or bear market, you must have this stock in your portfolio. That’s why it’s a good idea to add our Bottarelli Research Small Caps service to your investment arsenal today.

If you’d like to begin receiving our Friday afternoon small-cap picks, then I invite you to become part of Bottarelli Research Small Caps. When you look back a year from now, buying into these companies today could be the savviest investment decision you’ve ever made. For all the details about Bottarelli Research Small Caps, please review the special “invitation” letter below. And as always, I look forward to you expanding your Bottarelli Research investment arsenal! Full details below:

http://www.bottarelliresearch.com/smallcaps/?YNO29MY0T3

Lock and load!

Sincerely,