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Indices, Financials, & REITs

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NEW DIRECTIONAL PUT PLAYS

Diamonds - DIA - close: 78.55 change: -0.95 stop: 80.10

Why We Like It:
I really wanted to buy calls on the DOG, which is the inverse ETF on the DJIA. That way if the Dow Jones Industrials goes down the DOG will go up. Unfortunately the spreads between the bid and the ask for March options on the DOG were horrendously wide. Instead we're suggesting put options on the DIA.

Buy puts now with a stop loss at $80.10. The November 2008 low is near 7500 on the DJIA (75.00 for the DIA) so we're setting our first target to exit and take profits at $75.50.

Suggested Options:
Use the March puts. Strikes are available at $1.00 increments.

BUY PUT MAR 80.00 DIJ-OB open interest=6316 current ask $4.60
BUY PUT MAR 75.00 DIJ-OW open interest=2307 current ask $2.42

Annotated Chart:
DIA

Picked on February 14 at $ 78.55
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =      31.9 million  


iShares DJ Financials - IYF - close: 33.25 chg: -1.36 stop: 35.05

Why We Like It:
We already have a strangle play on the IYF but it looks like the financials are poised to break down. We'd like to try and capture the move with a directional put play on the IYF. I'm suggesting put positions now with a stop loss at $35.05. More conservative traders will want to strongly consider waiting for a new decline under $32.50 or under $32.00 as confirmation of the trend before opening positions.

The January 2009 low is $31.09. The IYF may bounce there. However, I'm setting our first target at $30.25. We're also setting a secondary target at $27.50 but I strongly suggest readers take the majority of the position off the table near $30.00. While the trend in the financials is lower they are subject to some pretty violent short covering rallies.

Suggested Options:
We're suggesting the March puts. Strikes are available at $1.00 increments.

BUY PUT MAR 35.00 IYI-OI open interest= 14 current ask $4.20
BUY PUT MAR 30.00 IYI-OD open interest=290 current ask $1.90
BUY PUT MAR 28.00 IYI-OB open interest=301 current ask $1.35

Annotated Chart:
IYF

Picked on February 14 at $ 33.25
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =      13.5 million  


iShares REIT - IYR - close: 28.41 change: -1.81 stop: 31.25

Why We Like It:
The real-estate stocks have all turned lower and the REITs look poised to test their 2008 lows. Unfortunately, the REIT stocks can be an extremely volatile group and the toughest challenge is stop loss placement. I think part of the reason this group is volatile is because it is such a crowded trade. Out of the huge number of investors betting on the decline there are plenty of skittish traders who jump to cover. I'm setting our stop loss 10% above our entry. That may actually be too tight. I'm suggesting readers buy puts now with the IYR under $30.00. Our first target is $25.25. I'm contemplating a secondary target closer to $22.00.

Suggested Options:
We're suggesting the March puts. Strikes are available at $1.00 increments.

BUY PUT MAR 30.00 BJN-OD open interest=25872 current ask $3.60
BUY PUT MAR 25.00 BJN-OY open interest=17028 current ask $1.40

Annotated Chart:
IYR

Picked on February 14 at $ 28.41
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =      42.2 million  


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