Play ABX Calls

Plus: QID and UYG Updates

By Bryan Bottarelli
Wednesday, October 15, 2008 10:29 AM EDT
Wed, 15 Oct 2008 14:29:00 GMT

PLAY: Buy the ABX November 30 Calls (ABX KF) at or under $3.70, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.10.

Dear Bottarelli Research Member,

In yesterday’s alert, I mentioned that Monday’s 970-point blastoff wasn’t necessarily the “all clear” signal. And today, the major market averages are once again selling off. As I write, the Dow is 300 points lower, noted by the chart below. Those who bought on Monday, in fear of “missing” the bottom, are getting their stones tested today. From the looks of the Dow chart, we’ll soon dip underneath the 9,000 level. If (and when) this happens, it’ll be interesting to see how quickly we give back the levels achieved by Monday’s advance.

INDU

As a result, let’s remain positioned on both sides via our QID Straddle. As I write, the QID October 65 Calls have traded as high as $7.40 and the QOD October 65 Puts are trading for $1.90, which adds up to a total price of $9.30. This is slightly higher than our $8.90 entry price, so let’s maintain both positions for more movement. If the combined value of the straddle moves up to $10.50, this would represent an 18% gain. That’s where I’d be looking to lock in profits. More to come.

QID

In other news, the UYG is not falling at the same rate as the major market averages, and this has tempered the potential losses on our UYG November 13 Calls (UUF KO). As you know, we’re holding this position with an average entry price of $2.35. And based off this week’s strong advance in the financial group, I’m still shocked at the levels that it’s trading. For whatever reason, the call values are still being held back. So once again, I think that the November expiration will help us, so continue to maintain this position.

UYG

In terms of a new trading opportunity, today’s down-move is once again bringing some investment attention into gold. After all, if the markets are once again in trouble, then gold is the one and only safe haven. Therefore, we now have an upside call opportunity in shares of Barrick Gold (ABX – NYSE).

ABX

As you can see, ABX shares set a low in September — and are now attempting to hammer out a higher low here in October. If successful, we could see shares of ABX shoot up past their 50-day moving average in short order. Therefore, let’s play this potential upside move using November calls. Here’s the play:

PLAY: Buy the ABX November 30 Calls (ABX KF) at or under $3.70, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.10.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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