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DIA – Dow Industrials ETF (Last:278.86)

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A target at 280.88 allowed us to get short four cents off what could prove to be an important top. An initial position of eight Nov 22 280 puts has yielded a partial profit that effectively reduced the cost basis for the two puts that remained to a $200 CREDIT. Because the options expired on Friday, I suggested rolling the position forward by buying two Nov 29 280 calls while letting the two puts we were long turn into short stock. This effectively gave us two synthetic put options that will provide further gains if DIA continues to fall while limiting our losses if the Dow recovers next week. The $140 we paid for the calls is more than offset by the $400 in theoretical profits booked on the sale of six puts from the original position.

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