Add GS and SDS Calls

Hedging for Another Push

By Bryan Bottarelli
Thursday, August 20, 2009 12:38 PM EDT
Thu, 20 Aug 2009 16:38:00 GMT

PLAY: Buy the GS September 165 Calls (GPY IM) at or under $4.70, good for the day. Place a protective stop limit at $2.30 and a sniper sell at $6.50.

PLAY: Buy the SDS September 45 Calls (SSH IS) at or under $2.50, good for the day. Place a protective stop limit at $1.30 and a sniper sell at $4.00.

Dear Bottarelli Research Member,

Following up on my earlier comments, let’s go ahead and enter a new round of upside calls on Goldman Sachs (GS – NYSE). As you can see, the stock recently dipped from $170 down to $160, but it’s now hammering out a nice little support point right around $162.00. Let’s get positioned to profit off a bounce-back towards $170 by adding September calls now.

GS

PLAY: Buy the GS September 165 Calls (GPY IM) at or under $4.70, good for the day. Place a protective stop limit at $2.30 and a sniper sell at $6.50.

At the same time, I’d also like to jump into a protective position on the UltraShort S&P 500 ProShares (SDS – NYSE).

SDS

Like I outlined yesterday (and followed up on earlier this morning), this market can roll over at any moment. It’s just a matter of time. But like we’ve seen this week, every new trading session tends to give birth to a new directional momentum play. Therefore, I think that the strategy of adding calls on a strong upside chart (like GS) combined with an ultra-short play (on SDS) gives us the flexibility to play these rips and dips most effectively.

Since we’ll be jumping in and out of these plays quickly, I recommend that you play these two on the lighter side. After all, we’re simply playing the market sentiment/momentum on an hourly basis. In this market, we have no other choice. But having both sides of the coin covered certainly stacks the odds of success in our favor. Let’s get positioned now!

PLAY: Buy the SDS September 45 Calls (SSH IS) at or under $2.50, good for the day. Place a protective stop limit at $1.30 and a sniper sell at $4.00.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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