Add SDS Calls

Plus: Maintain All Other Positions

By Bryan Bottarelli
Thursday, March 19, 2009 11:12 AM EDT
Thu, 19 Mar 2009 15:12:00 GMT

PLAY: Buy the SDS April 84 Calls (SBJ DF) at or under $6.10, good for the day. Place a protective stop limit at $3.30 and a pre-determined sniper sell at $10.00.

Dear Bottarelli Research Member,

In past alerts, I’ve identified 7,500 as the near-term top on the Dow Jones Industrial Average. As you can see from the chart below, the Blue Chips have attempted to penetrate this level for two straight days with minimal success. The more failed attempts that are made, the more exhausted the bulls will become. And in the end, the result will most likely lead to selling pressure.

INDU

Therefore, I’d like to carefully add one downside play right now, and it comes in the form of call options on the UltraShort S&P500 ProShares (SDS – NYSE). As you know, the SDS moves at a rate of twice the inverse of the S&P 500. Since the S&P 500 is more heavily weighted towards the financial stocks, any forthcoming pullback could push the SDS aggressively higher. In fact, after an impressive upside run, it now appears like the financials might be ready to give back some of their recent gains. As a result, I’d like to profit off a quick down-move by adding SDS calls now.

SDS

PLAY: Buy the SDS April 84 Calls (SBJ DF) at or under $6.10, good for the day. Place a protective stop limit at $3.30 and a pre-determined sniper sell at $10.00.

At the same time, I will continue to follow the movements of Prudential Financial (PRU – NYSE).As you know, we entered the PRU April 20 Puts (PRU PX) this past Monday for $3.26, expecting shares of PRU to fail at their 50-day moving average. Yesterday, PCU broke through this level, which was a cause for concern. But today, PRU is giving back all of these gains, which has snapped our puts back into form.

PRU

As I write, our puts have traded as high as $2.95 today, which is very close to our original entry price. For anyone still holding these puts, I’ll continue to follow them as our downsize thesis is finally playing out.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From March 2009