Playing Education Down
Add APOL and ESI Puts
PLAY: Buy the ESI March 110 Puts (O:ESI 10O110.00) at or under $4.00, good for the day. Place a protective stop limit at $2.50 and a pre-determined sniper sell at $6.50.
PLAY: Buy the APOL March 65 Puts (O:APOL 10O65.00) at or under $3.30, good for the day. Place a protective stop limit at $2.20 and a pre-determined sniper sell at $5.00.
Dear Bottarelli Research Member,
This morning, for-profit education firm ITT Educational (ESI – NYSE) was downgraded by RBC Capital Markets. As you can see below, this downgrade has pushed shares of ESI lower. By the looks of the chart, ESI still has plenty of room to fall. A double-top failure combined with a void around $100.00 makes for a juicy put-play potential. With the downgrade reaction priced in, I’d like to add ESI puts on any kind of upside pop. If this occurs, we’ll quietly move into ESI puts just prior to the next downward push. Today’s alert will attempt to short any temporary pop, which I think just occurred. Therefore, let’s get positioned now!
PLAY: Buy the ESI March 110 Puts (O:ESI 10O110.00) at or under $4.00, good for the day. Place a protective stop limit at $2.50 and a pre-determined sniper sell at $6.50.
At the same time, we can also profit off this situation by playing puts on competing for-profit education firm Apollo Group (APOL – NASDAQ). You see, what’s negative for one firm should be equally negative for its competitors. Therefore, as ESI falls, we have an opportunity to jump into APOL. From a chart perspective, a failure at the 200-day moving average indicates that APOL could be headed down to $60.00 (and perhaps even lower). Let’s get positioned to profit off any further weakness using March puts.
PLAY: Buy the APOL March 65 Puts (O:APOL 10O65.00) at or under $3.30, good for the day. Place a protective stop limit at $2.20 and a pre-determined sniper sell at $5.00.
In terms of our two protective hedge plays, represented by the SDS March 35 Calls (O:SDS 10C35.00) and the FAZ March 18 Calls (O:FAZ 10C18.00), I still feel like having downside protection is absolutely necessary in this market. Considering last week’s rally, I get the sense that everyone is now getting very comfortable with a bull market. This “comfort period” is usually when you see the bears come out to slaughter unsuspecting investors. When everyone is bullish, for example, making quick and easy profits on the downside is like shooting fish in a barrel. Now, I realize that our two hedges have moved down to nominal value. But going forward, the strategy might entail “rolling” these positions into April. When the time comes to make this move, you’ll be the first to know.
But until then…
Lock and load!
Sincerely,
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