Adding Protective Calls

Add AAPL November 105s

By Bryan Bottarelli
Monday, October 27, 2008 10:30 AM EDT
Mon, 27 Oct 2008 14:30:00 GMT

PLAY: Buy the AAPL November 105 Calls (QAA KA) at or under $3.40, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $6.00.

Dear Bottarelli Research Member,

In my earlier alert, I stressed the importance of refraining from getting involved with calling market bottoms. But at the same time, it’s also important to maintain a position that allows you to capitalize on any forthcoming market rallies. As I run through my scans this morning, the number of attractively priced stocks is off the charts. John Deere (DE – NYSE) at $30.00 looks like a steal.

DE

Caterpillar (CAT — NYSE) at $35.00 looks equally as strong. International Business Machines (IBM – NYSE) at $80.00, Weatherford International (WFT – NYSE) at $12.00, United States Steel (X – NYSE) at $34.00, Tesoro (TSO — NYSE) at $8.90, and Petroleo Brasileiro (PBR – NYSE) at $20.00 all make this list. And I could go on and on. But in terms of this particular play, I think that adding November $105 calls on Apple Computer (AAPL – NASDAQ) makes the most sense.

AAPL

As I write, shares of Apple are trading for $96.00, which means that the $105 calls are $9.00 out-of-the-money. But as you can see from the AAPL chart, the stock has the ability to jump up to $110 or $120 in a day or two. This is the type of position that we want — one which can tread water in a down-market and aggressively blast higher during a market rally. With the November $105 calls currently trading between $3.40 and $3.45 per contract, I think it makes sense to carefully add this position to our ledger — just as a way to be positioned in case we witness a freak upside move. Let’s add this play now!

PLAY: Buy the AAPL November 105 Calls (QAA KA) at or under $3.40, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $6.00.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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