DIA

We continue to hold four January 111 puts for 0.97.  My short-term bias is slightly negative, since the Diamonds have been working on a bearish impulse leg since Thursday. For now, do nothing further, but please note that the downtrend would need to touch 113.76 today to refresh the bear trend.

We hold four January 111 puts for 0.97 bought shortly after the opening on Wednesday.  The options were acquired not because the Diamonds were peaking at a Hidden Pivot target, but because they were starting to look tired. I am unable to project a downside target at the moment, other than a minor one at 114.59 (or 114.39 if any lower). That's a Hidden Pivot, and because its sibling midpoint at 114.87 has already been breached, it can serve as a minimum objective for now.

Just for the hell of it, let's try to buy four January 111 puts.  They closed @ 1.01, but I'll recommend bidding 0.97 for them at the opening. Stay tuned, since I may adjust the price. _______ UPDATE (9:53 a.m. ET):  We bought four puts for 0.97.  Do nothing further for now.

Despite yesterday's swoon, the Dow still looked bound for at least 11367.  The equivalent for the Mini-Dow is 11327, as noted earlier, and for the Diamonds 113.68.   As before, we'll try to short DIA by buying two December 112 puts when the target is reached.  I estimate that they'll be selling for about 2.38, but the best way to buy these options for a fair price is to simply monitor the spread for them as DIA closely approaches the target. _______ UPDATE (10:01 a.m. EDT): The exact high so far of today's QEII short squeeze is...113.68. This has allowed us to buy two Dec 112 puts for 1.96. (Option volatility got CRUSHED by the rally.) We'll risk 0.16 apiece on them, stopping ourselves out if they trade down to 1.80. I estimate that DIA would need to be trading for around 113.95 today to trigger our stop. _______ FURTHER UPDATE:  We were stopped out at 1.80 for a $32 trading loss plus commissions.  Although the Hidden Pivot resistance contained the gap-up rally that began the day, it was no match for the second-wind onslaught now in progress.

Cameco, a uranium play, has a chance to emerge from three years of purgatory if it can convert the nascent impulse leg shown in the chart into an abcd pattern that eventually reaches its target.  The impulse leg is promising already, having exceeded the requisite internal and external peaks on the weekly chart as well as a 29.98 target. It needn't even add a third peak -- last January's 33.74 -- to prove itself. I've sets screen alerts significantly above and below current levels and will update guidance if either is hit.

If a Hidden Pivot support at 107.59 is hit with DIA having gone no higher than 108.14, bottom-fish there by buying two October 108 calls. They should be tied to 107.52 stop-loss in the underlying vehicle. To avoid paying up for the calls, a strict no-no in my book, I suggest monitoring the bid/asked spread as the stock closely approaches the target.  If you don't know how to use an option calculator -- as why should you? -- the best way to determine how much to pay for an option is to determine how much the pros are paying for it.  _______ UPDATE (10:25 a.m. EDT): The trade was a non-starter, since DIA went no lower than 108.11 overnight.

We'll book a $266 loss in order to get this trade -- long two October 101 puts @1.33 -- out of our face. It was a pipe dream to think the broad averages might actually fall far enough to turn 101-strike October puts into winners, but at least we didn't jump on the erstwhile opportunity when the puts were trading above 5.00, as they did in late July. There's still a bid for the puts, so I'll record an actual trading loss of $218. That's assuming we blow them out for 0.24 apiece.

Yesterday's opening-bar short squeeze noticeably failed to pierce a pair of weakling highs recorded in mid-August, subtly hinting of buyers' gutlessness right now. We rarely speculate on such things, but what could it hurt to take a couple of put options home over the weekend? Treat this trade like a likely loser -- meaning, don't buy more than the couple of put options I am about to suggest. Make them October 101s, which settled yesterday at 1.39.  A price anywhere between 1.25 and 1.35 would be okay, but keep in mind that they will start to feel the weight of expiring September puts toward day's end, so if you are modeling their fair value, Monday's date is the one to plug in. _______ UPDATE (12:41 p.m. EDT):  We bought two October 101 puts on the opening for 1.33, a penny off the so-far intraday low. Now, put them out of mind for the time being.

Our backspread -- short August 102 puts, long August 98 puts in a 1:2 ratio three times -- opened @0.14, but prices steepened thereafter and the spread closed at 0.41. I'll assume an exit for 0.20 or less, which would have raised our $228 theoretical loss by a total of $60  (i.e., we paid 0.76 per spread to get in and another 0.20 to get out). We were unable to purchase September 101 puts for 1.00 as I'd suggested, since they never traded lower than  1.49. Expect the Diamonds to continue to fall, presumably to at least 102.54, a Hidden Pivot that comes from the 15-minute chart (see inset).  Shorting the downtrend will have to be on your terms, since I cannot predict how DIA will open, but if you choose to bottom-fish at 102.54, risk no more than a 15-cent stop-loss on any near-the-money calls acquired. _______ UPDATE (1:10 p.m. EDT):  My forecast very nearly caught the low, since it occurred at 102.78, but that was not quite close enough to get us aboard for officially for the bottom-fishing trade suggested above.