Global Sell-Off

Hold DXD Straddle

By Bryan Bottarelli
Monday, October 06, 2008 9:49 AM EDT
Mon, 6 Oct 2008 13:49:00 GMT

Dear Bottarelli Research Member,

Good morning. As we begin the first trading Monday of October, that “thud” that you hear is the sound of the global markets taking an absolute beating.

Look around, and you’ll notice that the world markets are hemorrhaging their values at an incredible rate. Could this be the capitulation selling day that everyone is waiting for?

If you ask me, the major market averages are tremendously oversold. Just look at a 3-year chart of the CBOE Volatility Index (VIX) and you’ll see that the “fear gauge” has never maintained such elevated levels for so long.

VIX

A similar look at the 3-year Dow chart shows that we’re now dipping into levels that we haven’t seen since 2005. In short, it’s an absolutely brutal market, which is why I want to continue our strategy of playing things like gold, straddles, and quick-hit winners.

INDU

Speaking of GLD, it’s up over $3.00 today as investors once again pile into the shiny metal as a safe haven investment. If we need to add more GLD calls, I’ll alert you later in the day. (I’d like to try picking it up on a dip. More to come.)

GLD

For now, our one and only position, the DXD Political Straddle, is once again working out perfectly. As you know, we entered the DXD October 65 calls and puts for a total of $9.20. And as I write you today, the puts alone have traded as high as $9.20. Combine the current values of both assets, and you’re showing a $10.80 value versus your $9.20 entry price. That’s good for an 18% winner. Now I must tell you: Safely making 18% in this market is nothing to turn your nose at. So for now, maintain both sides of your straddle. And as always, I’ll be out with further updates as the day progresses. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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