Leading Into the Close

Positions At Break Even

By Bryan Bottarelli
Tuesday, November 25, 2008 2:54 PM EST
Tue, 25 Nov 2008 19:54:00 GMT

Dear Bottarelli Research Member,

As of this afternoon, most of our current positions are sitting right at break-even prices. This morning, we sold the call side of our QLD December 22 Straddle for $4.80, which leaves us holding the put-side with a break-even price of $2.10. As I write, the puts have traded as high as $2.25, so any pending downside move and we’ll be locking in a nice return.

At the same time, the FCX January 22.5 Calls (FCX AX) that we entered yesterday for $3.90 have traded as high as $4.35 today. Since this is a longer-dated position, I’m comfortable holding this one a little longer. Therefore, maintain your calls into next week.

Looking at our MON December 75 Calls (MON LO), they’re gotten back to break-even today by hitting a high of $5.70. I still think that MON has a powerful upside move that has yet to be deployed, so maintain these calls for more gains.

MON

In terms of new plays, I think we could have a really nice opportunity to play calls on the UltraShort Oil & Gas ProShares (DUG – AMEX).

DUG

As you know, this vehicle moves at a rate of twice the inverse of the oil and gas sector. Therefore, any drop in the oil/gas names will fuel an aggressive pop in DUG. As you can see from the chart, the stock has just dipped below the critical support level at the 200-day moving average. Every time it has made such a move, a powerful upside rally ensued. Therefore, going into tomorrow, we could enter into a new round of DUG calls. But for now, let’s sit tight and see how we close today’s trading.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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