Add FCX Puts
Balancing Ledger with Downside
PLAY: Buy the FCX April 85 Puts (O:FCX 10P85.00) at or under $3.20 (or best price) good for the day. Place a protective stop limit at $2.00 and a pre-determined sniper sell at $4.50.
Dear Bottarelli Research Member,
First and foremost, congratulations on your Amazon.com (AMZN – NASDAQ) trade. This was a great example of why my staff and I sometimes implement a strategy that involves adding to our position to lower your total cost basis.
You see, we knew that AMZN was setting up for a move up to $140.00. The trouble is, you never can pinpoint exactly when it’ll occur. Therefore, if you find yourself in a similar situation, where we’re in a play that’s targeting a specific move but that move has not yet played out (and has thus reduced your option values), keep this in mind. If the parameters of our move are still in place, but option premiums are cheaper than before, we’ll recommend lowering our cost basis by adding to our position. That way, on mornings like this one (when AMZN decides to shoot up), we’re perfectly positioned to profit off the move. In a skittish market like this, where gains and losses are determined by a 15-minute window of opportunity, this is one of the best trading strategies available (but only when implemented properly, of course).
Looking at our current ledger, we’re currently holding the PNRA April 75 Calls (O:PNRA 10D75.00), the GMCR April 95 Calls (O:GMCR 10D95.00), and the MOS Earnings Strangle, which includes the combination of the MOS April 60 Calls (O:MOS 10D60.00) and the MOS April 55 Puts (O:MOS 10p55.00). Maintain these positions for more upside.
But just to add one put into the ledger, I’d like to play a coming pullback in shares of Freeport-McMoRan Copper & Gold (FCX – NYSE). In recently trading, FCX has moved sharply higher, as you can see from the chart below. But if the $85.00 level proves to be a resistance level, FCX could be due for a pullback. Let’s get positioned to ride a momentary dip by adding April puts.
PLAY: Buy the FCX April 85 Puts (O:FCX 10P85.00) at or under $3.20 (or best price) good for the day. Place a protective stop limit at $2.00 and a pre-determined sniper sell at $4.50.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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