Buyers bought the dip once again and the Dow finished at a new high. The bulls were placing their bets ahead of the Intel earnings Thursday evening.
The opening print was enough to stop us out of the bearish DIA call position at 106.50. This is not shaping up to be a good month but we still have over two weeks left to recover.
Our January DIA put is going to expire worthless without a 7.0 earthquake on Wall Street.
I heard a trader talking about buying the out of the money put and out of the money DIA call at the close on Thursday as a lottery play on the Intel earnings.
As an example the DIA closed at 106.75 on Wednesday. You could buy the 106 put for 28-cents and the 107 call for 37-cents. The odds are very good that the Intel news will produce better than a 100-point day on Friday. That equates to 1 point on the DIA.
If it is just "ok" earnings then one of your strikes will probably finish in the money and the other be worthless. Based on what the prices are at the close on Thursday you would probably have 50 cents invested. That means the DIA has to close at 105.50 or 107.50 for you to break even and outside that bracket for you to make money.
I personally would not take that trade although it is interesting. A 200-point move in either direction doubles your money but only a 75-point move leaves you busted.
I am a type A trader and love to take long shots but I think this is too long for my taste.
The better play would probably be to go long a March DIA call if Intel has blowout numbers because that could set the trend for the next two weeks.
I am going to wait until after Intel to add any new plays.
January Recommendation History