Clear The Ledger

Close ABX and UYG

By Bryan Bottarelli
Thursday, October 16, 2008 10:13 AM EDT
Thu, 16 Oct 2008 14:13:00 GMT

Dear Bottarelli Research Member,

Well, it’s quite apparent that I mis-timed the entry on our ABX November 30 Calls (ABX KF). As you can see from the chart below, ABX is currently sitting at a potential double-bottom formation. The last time it was at these levels, it quickly bounced up to $40.00, which simultaneously occurred as the markets sold off hard. I expected to see a similar type of money flow back into gold as a safe haven, especially after yesterday’s 700-point drubbing. But for whatever reason, gold is selling off today, and this has put us out of our ABX calls. If you haven’t already done so, close the position now.

ABX

At the same time, let’s also close off our UYG November 13 Calls (UUF KO). I’m losing faith in the market maker’s ability to properly price the value of this asset. What seems to be happening is that a major upside pop in the financial sector is not properly reflected in the options pricing, but a fall in the financial sector IS properly reflected in the pricing. This isn’t a situation I want to fight against, so let’s close this position now.

In terms of your ETR November 70 Puts (ETR WN), continue to work your sell orders, good for the day. And should any other trading opportunities arise, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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