DIA

The Diamonds are  creeping up on a shortable Hidden Pivot at ____. It's possible we won't get a better opportunity to lay 'em out than yesterday's 97.31 high, but if the opportunity arises today we can at least be ready.  Accordingly, I'll suggest buying two October 97 puts (DAVVS)  if DIA gets within 5 cents of the target.  A _____ stop-loss would be appropriate.  If you want to use a limit order, I estimate that the puts will be trading for about ____ with DIA at or near _____.

We took a small speculative position on Friday's close, buying four September 93 puts (DAVUO)  for 0.86 apiece. I'll recommend closing them out at-the-market if the Diamonds are trading 94.60 or higher an hour into the session. Otherwise, you can offer two to close for 1.16, day order. _______ UPDATE (11:22 a.m.):  The post-Labor Day surprise we'd anticipated was not to be, so we exited our puts for 0.63, realizing a trading loss of $92 on the position.  The fact that the market passed up a perfect chance to  catch investors with their pants down and is headed higher on the first day of the new season suggests that it will continue in bullish mode for a while, at least.  If we are to look now for an "October Surprise," the trick will be to determine which would be the more surprising: a melt-up or a melt-down?

I usually ignore hot tips, but a pen-pal of mine, Phil C., sent me a breathless, totally out-of-the-blue alert predicting that the Dow would rally 100-150 points this morning, forming a top from which it will collapse when traders return after Labor Day.  Putting aside the details, this sounds so absolutely right to me that I'm inclined to speculate modestly.  Mr Market loves to spring dirty, stinking, vicious surprises whenever possible, and what could be more vicious -- or more surprising -- than a tsunami to greet us as we return from our final summer vacation, tan, rested and anything but ready?  To get short, we can use the midpoint resistance at _____ shown in the chart, buying two September _____ puts if and when the Diamonds get there.

Our bearish position was short-lived, since we scratched September 95 puts acquired a day earlier when the Diamonds hit our stop-loss early in the session. There were two more spots where we could try to intercept -- at 96.00, or _____ -- but they come from an ABC pattern that is starting to look too obvious. Better to get long for the pop to the higher number, assuming it comes. This would perhaps be best accomplished using "camouflage" in the first 15 minutes of Wednesday's session, so I'll make that an assignment for pivoteers who are in the chat room at the time.

We hold two September 95 puts for 1.76 that we bought when the Diamonds rallied yesterday morning to within a single cent of our Hidden Pivot target, 95.82.  Continue to offer two Setpember 92 puts short against them for 1.40, good-till-canceled, but stop yourself out of the existing position if DIA touches 95.70 today.

We were looking to get short at 95.61, but let's lower our sights for now to a lesser Hidden Pivot at ____. Buy two September ____ puts, which should be trading for around _____. You can use a limit order at that price if you'd prefer to park the order with your broker, but be sure to stop yourself out if the underlying stock touches _____.

A Hidden Pivot resistance at _____ is equivalent to the target given for the cash Dow in today's Side Bets. I'll suggest buying two September 91 puts (DAVUM), good through Thursday, if and when the stock reaches the target.  The options would be attractively priced at around ____ if you want to park a limit order with your broker, but be prepared in any case to stop yourself out if DIA trades above _____. I've included a snapshot of my option calculator, into which I've plugged a 23 volatility that I interpolated from Tradestation.

The Diamonds looked bound for at least 93.65 over the very near term when the clock ran out yesterday, so this vehicle is probably best traded from the long side if it doesn't gap too ferociously above yesterday's highs near 93.  The benefit of camouflage seems unlikely, but my hunch is that a straight point 'X' entry on the very lesser charts will work if it is the first such opportunity of the day.

The Diamonds blew past a 91.96 Hidden Pivot target, stopping us out of some September 90 puts that we held very briefly for a small loss. The rally was just a run-of-the-mill short squeeze begun on garden-variety opening-bell gap, but notice in the accompanying chart how it managed to slightly exceed a very subtle look-to-the-left peak made back in January. This spells more trouble, as far as I'm concerned, for any bear who was counting on reality to reassert itself in the stock market.