Add VZ Puts

Plus, Maintain Positions

By Bryan Bottarelli
Monday, November 17, 2008 10:31 AM EST
Mon, 17 Nov 2008 15:31:00 GMT

PLAY: Buy the VZ December 32.5 Puts (VZ XZ) at or under $4.70, good for the day. Place a protective stop limit at $2.30 and a pre-determined sniper sell at $6.20.

Dear Bottarelli Research Member,

Good Morning.As we begin the last full trading week in November, the major market averages are once again drifting lower. As I study today’s Dow chart, it looks like we could soon see another push below the 8,000 level. But at the same time, we also must be prepared for the sudden and dramatic upside moves that we’ve seen lately. So as always, we’ll continue to be nimble and opportunistic in this market environment.

INDU

Looking at our current call positions, I’d like to continue holding our DNA December 85 Calls (DWN LQ) and our GDX January 23 Calls (GBJ AW). Both positions, in my view, could be aggressive upside movers on any sort of market strength. Looking specifically at DNA, the stock looks poised to bounce at any moment — especially using the 200-day moving average as a launch point.

DNA

Over on the put side, I’d like to continue holding our PSA December 65 Puts (PSA XM). Over the last two months, PSA’s Director Wayne Hughes has been selling off massive amounts of stock. At last check, he’s sold over $75 million in PSA stock since September. Obviously, he knows something that we don’t. But I can make a reasonable guess that it’s not good news. Today’s new 52-week low on PSA indicates more selling pressure on the horizon. Hold your puts for more upside.

PSA

I will also continue to follow our COST December 45 Puts (PRQ XI). As you know, we entered these puts on 11/13/2008 for $3.28 per contract. And due to some super-choppy trading in the retail sector, they briefly tapped our stop-out price. But just as quickly, COST reversed course and dropped back down — pushing these contracts back to break-even. You can see this movement indicated by the long candlestick tail that touched the $45.00 level. In my view, COST will re-test this $45.00 level, so I will continue to follow these puts for the benefit of anyone still holding them.

In terms of new trades, I think we have a put-play opportunity on shares of Verizon (VZ – NYSE).As you know, I’ve been expecting VZ to fall for the last two weeks. The recent jump from $24.00 up to $32.00 was simply unsustainable, and now, the stock has finally dipped back underneath the 50-day moving average. This tells me that a move back to $24.00 could be in the cards, so let’s play this move using December puts. Here’s the play:

VZ

PLAY: Buy the VZ December 32.5 Puts (VZ XZ) at or under $4.70, good for the day. Place a protective stop limit at $2.30 and a pre-determined sniper sell at $6.20.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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