The Ultlra Short Oil & Gas Proshare ETF (DUG) is showing signs of strength as the crude oil contract begins to decline ahead of hurricane Gustav entering into the Gulf of Mexico. I think that the decline in oil reflects the dollars strength and the global economic slow down. As we approach the weekend, the volume will most likely decrease. Therefore there might be a sudden increase in the price of oil once the storm passes and there is actual damage. Otherwise, if there is no real damage to the supply line then the price of oil should decline.
We are selling the 31 strike price for a target of $0.65. The picture above shows $0.625 because of the midpoint at the time of screen capture. I will be creating a short strangle on DUG by selling the 40 or 41 Call strike. While there is support at $32.50 - 32.70 the horizontal line at $30.47 will be our technical support stop.