DIA

I'm tracking a position of 12 December 145 puts @ 0.37. Yesterday's finishing stroke looked like the beginning of a take-no-prisoners short-squeeze, but if Thursday begins with even a modest rally, it will reduce the puts to less than half of what we paid for them in a trice. Ordinarily, this is where I would bail out. But keep in mind that we are building an offsetting position using NFLX calls to straddle our bet, and they will more than cover the $450 cost of the puts if stocks rally into year's end. Rather than suggest that you stop yourselves out of the puts at, say, 0.18, my hunch is that DaScumballs will drop their bids for them so precipitously Thursday morning that we'll probably regret not having bought more of them. Accordingly, I'll suggest putting in a lowball, 0.11 bid for 50 more of them, good only for the first five minutes of the session. If stocks open sharply higher, don't be surprised or disappointed if the puts go for 0.12 and we're shut out, since that's how DaBoyz play this game. If they let us in on the trade, it will only be because the market has opened strongly enough to make DaBoyz think they could steal the puts or 0.10 or less. Rather than let us take them all, they'll match our bid, since paying 0.12 just to shut us out of the trade would be too high a price to pay.  If you buy the puts for 0.11, offer half of them to close at 0.19 for the remainder of the day. _______ UPDATE (11:30 a.m.): Although the stock opened only a penny above the previous day's closing price, the aforementioned Scumballs managed to shake down the puts to 0.22 on the opening rotation. To succeed

We've been bidding for Nov 22 350-360 call spreads, but I'm now going to suggest going further out in time and higher in price.  Using the 411.45 rally target shown in the chart (inset) as a price objective for the remainder of 2013, I'll recommend bidding 0.40 for 16 December (monthly) 400-410 call spreads, good till canceled. You can pay that price as long as the stock is trading 333.50 or higher, but if it falls beneath that level, reduce your spread bid by 6 cents for each $1.00 the stock declines.

Yesterday's nasty bull-trap opening peaked at 157.80, just 0.02 points from the rally target I'd proffered the day before. No subscribers reported buying December 145 puts as I'd suggested, presumably because the puts hit their intraday low only fleetingly on the opening rotation. The 0.29 price was somewhat higher than I'd estimated, but this is good news since it indicates that the market makers themselves were eager buyers, taking advantage of a flurry of panicky sell-at-the-market orders from rubes who were spooked by DIA's illusory show of strength. Fortunately, we already held a dozen of the puts for 0.37, since our entry strategy has been to scale-in puts as their price fell. Our bearish play was based more on a gut hunch than on Hidden Pivot targets, but it has enabled us to stake out a bearish position at an excellent price.  Although we can't be certain yet that we have caught THE top, we have most surely caught an opportune top. DIA plummeted from the opening bar, finishing the day with a fresh, bearish impulse leg on the 30-minute chart (see inset).  For now, let your profits run.  ______ UPDATE (November 10, 7:51 p.m. EST): DaBoyz wrung an impressive short-squeeze from Friday's employment news, but let's see how long they can sustain the hoax, given that no one but our own Gary Liebowitz actually believes the economy is strengthening. The squeeze has sufficient power to reach the 158.51 target shown, which could push our puts down by as much as 15-20 cents. Since this could happen fleetingly on the opening bar, I'll recommending holding the position no matter what happens at the bell. Check back here or in the chat room for an update, though, since it may become prudent to cut our losses intraday. _______ UPDATE (November 12,

We exited eight November 155 puts on a stop yesterday for a $200 loss. Assuming you're game to try again, I'll suggest doing so without the usual safety net of option spreads and stop-losses. Look at the chart (inset) and you can see why both risk and opportunity are at apogee right now. Here are just a few of the bets one could make:  1) DIA will collapse without having achieved a new record high, marginal or otherwise.  This would fake out bulls, but also quite a few bears; 2) spectacular new highs lie just ahead; 3) a timid poke above the mid-September high will be the bull market's last gasp; 4) a tedious grind higher will sap bulls and bears alike in the months ahead; 5) new record highs will give way to a scary pullback, then one final, take-no-prisoners rally. Outweighing all of these possibilities, in my opinion, is the economic black hole of Obamacare. So certain am I that all of the quantitative easing the Fed can muster will not even begin to alleviate its crushing weight that I'm going to suggest going deep on the next pass. Accordingly, I'll recommend buying a dozen December 145 (monthly) puts when DIA hits the 156.86 midpoint pivot shown, and another twelve when it reaches the trendline at 157.92. (The puts closed Monday on a 0.47 offer. If we buy them at both levels, the intervening rally will likely cause the puts to drop in value by about 10-12 cents.) The orders are good through Wednesday. Any tracking position that I establish will be guided by reports of fills at specific prices in the chat room. _______ UPDATE (10:32 a.m. EST): Because a few subscribers reported in the chat room that they held onto their November puts, I'm going to

We're attempting to short eight November (22) 152 puts for 1.50 against eight November 155 puts we already hold for 1.34. The former traded no higher than 0.64 on Friday before DIA  reversed and move sharply higher into the close, driven by short-squeeze dynamics.  Stand pat for now, maintaining the 1.09 stop-loss on the puts. _______  UPDATE (11:05 a.m. EDT):  We were stopped out when the puts traded for 1.08, the low of the day. I had not intended this, to say the least -- especially since I was certain that Monday would begin with a failed, bull-trap rally. We'll keep trying, since I remain firmly convinced that the stock market is at, or very near, a bull market top. Had I known DaBoyz would shake down the December 155 puts to 1.08 on the opening bar, I'd have told you to buy 50 more of them at that price.

Subscribers who followed my advice are long eight November 155 puts [weekly, expiring Nov 22, not Decembers, as erroneously given here earlier] to which I have assigned a consensus-based cost basis of 1.34. My hunch is that the 1.09 stop-loss I advised for the puts will not survive, but we'll stick with it anyway for the sake of discipline.  With a delta value of 0.38, assuming theoretical values hold true, our stop would trigger with the underlying trading around 156.86.  In practice, since puts often gain 'juice' on rallies, it may require a thrust above the all-time high at 157.06 to cause the puts to actually trade for 1.09 (as opposed to merely being offered at that price). _______ UPDATE (12:44 p.m. EDT): Against the puts we hold, offer eight November 22 152 puts short for 1.50, good till -canceled. I estimate that DIA would have to fall to around 153.00 to get us filled.  We are effectively trying to leg on a $3 vertical bear put spread for a small credit. Ordinarily I try to achieve this with a $5 vertical spread. This time, though, I'm being a little more conservative. The net result if we succeed would be a potential $2400 winner with zero risk, and it would take only a moderate decline over the next month to produce the maximum payoff.  Incidentally, today's decline from the sleazy, bull-trap high is bearishly impulsive on the hourly chart. But we'll wait to see what kind of c-d follow-through it produces before we start counting any unhatched chickens. _______ UPDATE (October 30, 10:27 p.m. EDT): Okay, the telltale pattern mentioned above is taking shape, with a midpoint support at 155.51 (see inset) that will have to show some pluck if bulls are to avoid getting butchered.  If the pivot gives

Unlike the E-Mini S&Ps, which I've suggested shorting at 1767.00, this vehicle will not be at a new all-time high when it reaches an equally fetching Hidden Pivot target.  The precise number is 156.13, and I'll suggest buying eight November 155 (monthly) puts if and when DIA gets within a few ticks of the target.  The puts should be trading for around 1.00-.105 at the time, although I cannot guarantee that this estimate will be within even 0.10 of actual. The price is unlikely to be lower than 0.99 however, since the puts should gain 'juice' as DIA rallies. I haven't specified a price for the puts because I don't want you to miss this drum-rolled trade merely because I was off by a few cents. Please report any fills in the chat room so that I can establish a tracking position. I'll use a median price rather than best or worst case, with a free month's subscription for whoever achieves the best fill. ______ UPDATE (October 29, 12:01 a.m. EDT): This short looks a little safer to me than the one I've suggested in the E-Mini S&Ps, so we needn't make much of an adjustment, just this: Use a stop for the puts 0.25 below whatever price turns out to have been a pretty good buy.  I'll fine-tune this advice in the chat room when appropriate, so stay tuned. _______ UPDATE (12:17 a.m.): DIA November 155 puts expiring Nov 22 look like they'll be a good buy for around 1.34 with DIA at or very near my 156.13 target. Bid 1.35 for eight, stop 1.10. We are risking $200 theoretical. ________ UPDATE (12:50 .m. EDT): Based on reports in the chat room, I'll use a 1.34 price as our cost basis. For now, stop yourself out if the puts

As you will already know, I think the bull market is over. In the chat room this morning I detailed my plan for shorting the stock market by legging into tight vertical put spreads with a strike differential of perhaps $1-$2 rather than the usual $5-$10.  I'd prefer to do this with stocks in a strong rally, but it's possible we may not see much of a rally if and when the urgently awaited legislative turd emerges from Congress in the form of a compromise.  To  get our minds right for the task, I'll suggest monitoring the January 120-122 put spread. It closed yesterday at 0.05, but we'll be looking to put it on for 'even' or better, starting with a purchase of perhaps 60 of the Jan 122 puts. To be in a position to short January 120 puts against them for at least as much as we have paid, we'll need to see a decline of about 1.20 points from the price where we've bought the 122s. _______ UPDATE (9:50 p.m.): Yesterday's chock-full-o'-nuts rally has encouraged me to think we can be a little more greedy about where we get short.  This could prove to be a game of 'chicken', but if we stick to the conservative spread tactic described above, our timing will not have to be so perfect. ______ UPDATE (October 20, 8:34 p.m. EDT):  Stay tuned for a short-able target, since this vehicle is headed higher if the E-Mini S&Ps are to reach their target at 1748.00. _______ UPDATE (October 22, 9:25 p.m. EDT):  With a rally target at 1767.00, we can remain patient. If and when DIA reaches a threshold analogous to that target, we'll want to short it aggressively.

My gut feeling is that stocks are entering a high-odds window for a collapse.  Although I doubt it will occur in time to push our September 140-135 put spreads into the promised land (we hold 16 of them effectively for free), I wouldn't be surprised if the broad averages fall with a vengeance immediately after September expiration.  Accordingly, let's try to buy a dozen October 140 puts for 0.46 today. My goal is to short-sell some October 135 puts against them for at least as much so that we again have no risk. The Dow would need to rise by about 120 points today to get us filled on the 140s, but I'll adjust the price if it looks out of reach. To stay apprised in real time, tune to the chat room or check the 'E-Mail Notifications' box on your My Account page. ________ UPDATE (September 10):  The OPM (Other People's Money) lunatics have control of the stock market right now, so there's no great urgency about buying the puts (which we missed getting yesterday by 2 cents when they traded no lower than 0.48.)  Because DIA-mania has pushed well above the red line (aka 'p') of the ABC pattern shown (see inset, a fresh chart), we should look for more upside over the near term to at least 151.23.  Accordingly, I'll suggest buying 12 October 140 puts if DIA gets within 0.05 of that number.  The puts will be worth about 39 cents at that point, but you should pay no more than 41 cents for them in any case. If you buy them, stop yourself out if they trade down to 29 cents.  Our theoretical risk for this speculative play would be $156 plus commissions. ________ UPDATE (5:45 p.m. EDT): Subscribers reported fills at 0.39, so the