Take OIH Profits!

Lock in Oil Winner

By Bryan Bottarelli
Wednesday, August 19, 2009 12:13 PM EDT
Wed, 19 Aug 2009 16:13:00 GMT

PLAY: Sell your OIH September 105 Calls (OIH IA) at market, good for the day.

Dear Bottarelli Research Member,

Let’s go ahead and lock in gains on our OIH September 105 Calls (OIH IA). As you know, this position has been quite volatile. After entering last week, we’ve seen both gains and losses. But when the markets sold off aggressively, we added to our position, which in retrospect was a very savvy move. This entry was timed perfectly.

OIH

As I write, we’re holding these calls with an average entry price $3.45, and they’ve traded as high as $3.80 today. For those of you who sold your OIH calls last week and re-entered this week, you’re doing even better. Perhaps these calls will break $4.00, or perhaps they’ll drift lower. Either way, I’d like to take the money and run!

PLAY: Sell your OIH September 105 Calls (OIH IA) at market, good for the day.

This will leave us long metals and technology, represented by the AEM September 55 Calls (AEM IK) and the CREE September 35 Calls (CQR IG). From a tactical standpoint, this leaves us exposed to any forthcoming downside moves, which is something we’ll rectify when the timing is right.

Consider this an early heads-up, but as a pure hedge against a downside market move, the time might be coming to add calls on the Pro Shares Ultra Short S&P 500 (SDS – NYSE).

SRS

As you know, the SDS moves at a rate of twice the inverse of the daily performance of the S&P 500 Index. Therefore, if the S&P 500 drops 2%, the SDS gains 4%. This double-leverage offers us a perfect way to hedge against downside market risk. If the market begins to break down, keep an eye out for a play. Until then, sit tight.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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