October 31st, 2014
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DIA – Dow Industrials ETF (Last:133.18)

by Rick Ackerman on December 18, 2012 2:45 am GMT

We hold four January 128 puts purchased for 1.00.  DaBoyz are obviously capable of squeezing quite a bit of yardage from the ’story’ that Democrats and Republicans are getting ‘closer’ to an ‘agreement’.  So that we do not find ourselves having to give such claptrap even a passing thought, I’ll suggest raising the stop-loss on the puts to 0.80.  This means that if they trade at that price (or perhaps below it on a gap), you should sell them at-the-market.  Some subscribers have already shorted Jan 127 puts against the 128s for more than they paid.  That is what I should have recommended to you myself, since any profit on a put position, especially in December, is as rare as gorilla eggs. Those of you who have hedged the position in this way should simply forget about it and enjoy the show, since you’ve got a lottery ticket that cost you nothing.

Technically speaking, the Diamonds look bound for at least the 133.35 mipdoint resistance shown.  We’re jumping the gun to be plotting an exit before that threshold is reached, but my gut feeling is that strong impulsiveness of this move is sufficient to torment bears for the remainder of the year.  We’ll plan on re-shorting this brick when a better  opportunity presents itself, but for now let’s cut our theoretical position risk to $80 plus commissions.  _______ UPDATE (11:15 a.m. EST): With the short squeeze on the Dow continuing, we exited the puts at 0.80, booking a theoretical trading loss of $80.  We’ll want to try getting short again (and again, and again), but for now do nothing further.

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