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DIA None
DDM  
SPY  
SSO  
TRA  

Play Editor's note: There is still a lot of uncertainty and fear in the markets and stocks could still go lower even though Friday had a lot of potential to be a significant bottom. The best trade is probably to sit on the sidelines. The dust hasn't even begun to settle yet.


New Long Plays

Diamonds - DIA - close: 83.75 change: -1.80 stop: 71.95

Company Description:
The DIAMONDS are an exchange traded fund (ETF) that mimics the performance of the Dow Jones Industrial Average.

Why We Like It:
It was not universally accepted that Friday was the bottom and final capitulation in the market. There were some definite signs suggesting it could be a bottom but you could easily argue that Friday's late afternoon rally was mostly short covering. So what happens if Friday wasn't the bottom? Then the DJIA is likely to fall toward its 2002-2003 lows near 7500. If that happens we want to be ready. We're suggesting readers buy the DIA if it pulls back into the $76.00-75.00 zone. Volatility is at all-time highs so we're using a wide stop loss at $71.95. If triggered at $76.00 we're listing two targets. Our first target is $85.00. Our second, multi-week target would be $95.00.

Alternative strategy: So what if Friday was the bottom? Given the last hour sell-off on Friday there is a good chance that the markets could retest their lows. The DIA hit $78.94 on Friday. This is not an official play but if you think the 8,000 level on the DJIA will hold then consider buying the DIA on another dip into the $80.50-80.00 zone with a stop loss pretty tight under Friday's low.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume: 27 million

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Ultra Dow30 Proshares - DDM - close: 34.00 chg: +1.00 stop: varies

Company Description:
This is the Ultra (Long) Dow 30 ProShares, which is an exchange traded fund (ETF) that moves twice the daily performance of the Dow Jones Industrial Average.

Why We Like It:
This is the same play on the DJIA as the DIAMONDS above except we're using the ultra-long on the DJIA. If the DJIA dips into the 7600-7500 zone then we want to go long the DDM. This could mean a drop in the DDM into the 27-26 range or more. Keep in mind that the DDM will be twice as volatile so our stop loss will have to be twice as wide. I'd probably start with a stop about 10% under our entry point. In summary, our entry on the DDM is based on the movement in the DJIA. If triggered our first target is a 20% gain. Our secondary target is a 30% gain (in the DDM).

Alternative: If you think Friday was the bottom then consider buying the DDM on a dip back into the 30-28 zone with a tight stop.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/30/08 (unconfirmed)
Average Daily Volume: 4.7 million

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S&P SPDRS - SPY - close: 88.50 change: -2.20 stop: 76.90

Company Description:
The S&P SPDR is an exchange-traded fund (ETF) that mimics the performance of the S&P 500 index.

Why We Like It:
This play is the same strategy above but based on the S&P 500 index. If Friday was not the bottom then the S&P 500 will probably dip toward its 2002-2003 lows near 800 ($80 for the SPY). We are suggesting readers buy the SPY in the $81.00-78.00 zone with a stop loss at $76.90. If triggered at $81.00 our first target is $89.50. Our second target is $96.00.

Alternative: If you think Friday was the bottom then consider buying dips in the $86.00-84.00 range with a stop under Friday's low.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume: 316 million

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Ultra S&P500 ProShares - SSO - close: 29.00 chg: -0.70 stop: varies

Company Description:
The Ultra (long) S&P500 ProShares is an exchange-traded fund (ETF) that moves twice the daily performance of the S&P 500 index.

Why We Like It:
Here is the same play on the S&P 500 but with the ultra-long etf. Watch the S&P 500 index. If it trades in the 810-800 zone then we want to go long the SSO. That could be a drop into the 23.50-22.00 zone for the SSO. If the S&P 500 index hits our trigger then our first target for the SSO is +20%. Our second target is a 30% gain. We are suggesting a stop loss 10% under our entry price.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume: 20 million

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Terra Inds. - TRA - close: 19.83 change: -0.17 stop: 16.49

Company Description:
Terra Industries Inc., with 2007 revenues of $2.4 billion, is a leading international producer of nitrogen products. (source: company press release or website)

Why We Like It:
TRA is part of the fertilizer-chemical industry and the group appears to be forming a bottom. Stocks in this group have been trading in a sideways range after some massive declines in the last four weeks. We want to be ready if TRA makes a move. However, we're listing two different entry points. If TRA breaks out from its range then we want to use a trigger to buy the stock at $22.65 with a stop loss at $19.95. If TRA dips back toward the bottom of its range then we want to buy the stock in the $18.25-17.50 zone with a stop loss at $16.45. Our first target on TRA is $27.00. Our second target on TRA will be $33.50.

Picked on October 12 at $19.83
Change since picked: + 0.00
Earnings Date 10/23/08 (unconfirmed)
Average Daily Volume: 5.7 million
 

New Short Plays

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