Add More UYG Calls

The Fine Line Between Sensibility & Aggression

By Bryan Bottarelli
Thursday, October 09, 2008 11:29 AM EDT
Thu, 9 Oct 2008 15:29:00 GMT

Dear Bottarelli Research Member,

It’s hard to even imagine, but the Dow has now lost 2,000 points in nine (9) trading days. If you look at the chart below, you’ll see that the downside selling pressure is so intense, the chart itself cannot even account for the downside levels of the red price tick. My friends, this down-move is truly unprecedented.

INDU

We’re seeing the same thing on the Ultra Financials ProShares (UYG – AMEX), noted below as well.

UYG

As you know, I attempted to play a bounce in the financial sector using the UYG November 13 Calls (UUF KO). We entered these calls on Tuesday for $3.30, and they’re currently trading for $1.40. Admittedly, we haven’t seen the move that I expected. But the weakness is partly due to specific news-driven instances on certain banking stocks, notably Bank of America’s share price dilution on Tuesday and today’s 15% down-move on Morgan Stanley.

But that’s why I played November contracts instead of October. You see, the low cost of these calls, combined with an extended expiration date, should give us some leeway to witness the bounce that I expect. Therefore, I’d like to get aggressive here and add to our position. In this market, we must walk that fine line between sensibility and aggression. I think this move fits into this model. Here’s the play:

PLAY: Buy more UYG November 13 Calls (UUF KO) at market, good for the day. This will lower your total cost basis down to $2.35 per contract. At this time, do not place a protective stop limit or a sniper sell. I’d like to hold onto these contracts for at least a week, which would give them the appropriate room to move.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From October 2008