With the Dow closing on a rally target I’ve been featuring here for a while, I looked for corresponding opportunities to get short using DIA puts. However, the possibilities are too numerous to give us good odds, so I am not recommending a specific trade. For your guidance, however, if you are itching to take the initiative, I will mention that D2=253.31 is the target most closely related to the one at 25,278 that I’ve proffered for the Indoos. It is also the pattern, of the three that are available, that picks up the most confirming ‘hits’ at the midpoint pivot, 247.21. _______ UPDATE (Jan 7, 5:30 p.m. EST): Buyers pushed DIA to within pitching wedge distance of the 253.31 target. If you’ve made money on the rally, be prepared to reverse the position or go short ‘against the box’ when the target is reached. Specifically, I’ll recommend buying four 12 Jan 253 puts with DIA trading 253.27 or higher, day order. They should be trading for around 0.55-0.60, but you can improve your odds of getting them at ‘fair value’ by closely monitoring the bid/asked spread when DIA gets with about 0.30 of the target. Stop yourself out of the puts if they trade for 0.25 less than you paid for them. _______ UPDATE (Jan 8, 10:19 p.m.): Let’s move out a week and down one strike, bidding 0.86 for four 19 Jan 252 puts, day order, with DIA trading 253.25 or higher. Check back if the options are out of range, since I may recommend raising our bid._______ UPDATE (Jan 9, 9:48 a.m.): Stocks are rallying this morning as usual, allowing subscribers to fill the order @0.81 or better. We’ll risk $100 with a 0.56 stop-loss. Exit on a market stop if the puts trade there, good-till-canceled. Make the order O-C-O with an offer to close out two of the puts for 1.06. _______ UPDATE (Jan 9, 11:34 a.m.): The only certainties in life are death, taxes — and that DIA, having obliterated our 253.31 ‘hidden’ resistance, will now rise to at least 254.02. (A=232.65 on 11/15). At that point our puts will be close to the 0.56 stop-loss I’d advised, so I’ll recommend altering the stop so that it is now tied to the underlying, thus: Exit the puts if DIA trades 254.12 or higher. These against-the-trend trades are fun, and they help make an otherwise excruciatingly boring bull market seem slightly interesting, but they will always be bucking long odds. Henceforth, I will recommend them ONLY WHEN YOU/WE HAVE MADE PROFITS ON THE LONG SIDE on the way to the targets. _______ UPDATE (Jan 9, 11:04 p.m.): The puts puts puts puts p-u-t-s were stopped out for around 0.57, producing a position loss of about $100. DIA slightly exceeded a revised target at 254.02 that I posted in the chat room after the one at 253.31 was surpassed, and it’s possible this will produce a short-term top. Regardless, we’ll do nothing further for the time being. ______UPDATE (Jan 10, 8:22 p.m.): It’s still possible we’ve seen a top of at least minor importance.
