Losing Steam

Add to SDS Calls

By Bryan Bottarelli
Tuesday, September 08, 2009 11:50 AM EDT
Tue, 8 Sep 2009 15:50:00 GMT

PLAY: Buy more SDS September 45 Calls (SSH IS) at market, good for the day.

Dear Bottarelli Research Member,

Good morning. The major market averages shot out of the gates this morning, lead by further upside in gold and oil. Looking specifically the yellow metal, the United Nations announced today that the U.S. dollar should get replaced with a global currency, representing the biggest proposed overhaul of the world’s monetary system since World War II. As you know, China and Russia have been pushing for this move for many months. But now, the entire U.N. seems to be on board. As a result, the U.S. dollar is falling today while gold prices have pushed aggressively above the magical $1,000 level.

According to Detlef Kotte (who is one of the report’s authors), “Replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits.” When you see news like this, the picture becomes as clear as day. The most powerful nations in the world are becoming increasingly worried about the debt levels that the United States continues to take on, and they’re collectively preparing for ways to address this troubling situation. For this reason, I want to maintain a two-sided ledger. I also want to remain cautious and nimble with all of our trades.

Looking specifically at our ledger, we’re positioned to the upside using our ESI September 105 Calls (ESI IA). After adding to these calls, our average entry price is $2.25. And after dipping at the open, ESI has put in a nice recovery, which has pushed our calls back to a high of $2.15. Remember, the higher the unemployment rate goes, the better things look for a secondary education company like ESI. Hold for more upside.

ESI

On the downside, we’re positioned via the SDS September 45 Calls (SSH IS) and the BEN September 95 Puts (BEN US). I continue to feel that BEN could fall sharply at any moment, especially considering the diminishing strength in the financial sector. The 60-minute chart shows a large void that’ll get filled to the downside. This will be good for our puts. Hold.

BEN

At the same time, a market reversal could also trigger a comeback on our SDS Ultra-Short protective position. Let’s lower our cost basis and add to this position now!

SDS

PLAY: Buy more SDS September 45 Calls (SSH IS) at market, good for the day.

ADMINISTRATIVE NOTE: In what’s quickly turning into a yearly tradition, the Bottarelli family will be taking advantage of the “back to school” rush by taking the kids down to Disney World. I’ve learned that this is the absolute best time of the year to visit Disney, as the lines are microscopic — making the entire experience infinitely better. As a result, there will be no options alerts for the remainder of the week. Going into today’s close, I’ll give you parameters on how to manage our active plays in my absence. This should help you determine exit prices for the remainder of the week. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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