QQQQ

We've been playing patticake with a single March 44 put that we hold with a cost basis of 0.23.  Let's get more aggressive with some scale-in buying of April 42 puts.  Bid 1.11 for two and 1.03 for five more, good through Thursday. You should also cancel the g-t-c order to short a March 39 put against the put we own. _______ UPDATE:  We bought the puts as planned and now hold seven of them for an average 1.05, plus the March 44 put. Nothing further is advised for now.

I was a tad greedy on Friday in having you hold out for a few more measly cents when the March 39 puts trade as high as 0.57.  (Our short offer lay at 0.65.)  The selloff that sent the puts soaring may have marked fear's apogee for a while, so I'll suggest offering the put short for 0.45 now, good-till canceled.  We are already long one March 44 put with a cost basis that has been reduced to 0.23 by profit-taking.

We hold two March 44 puts for 0.75.  Cancel the order to short March 39 puts against them, and take partial profits by selling one of the puts market-on-open.  Tie the other to a stop-loss at  45.73. _______ UPDATE (10:44 a.m.):  The 1.27 we received for the put on the opening has effectively reduced the costs basis of the put that we still hold to 0.23.  Now, offer a March 39 put short against it for 0.63, good till canceled.

Don't forget, we've got a $2 nag in the race via the two March 144 puts we purchased last week for 0.72. Officially, we are trying to spread them off by way of the short sale of two March 39 puts for 0.77, good till canceled.  Unofficially, however, to those who may have done this trade in greater size, I would recommend taking profits on 30%-40% of the position now, since the puts have more than doubled in value in the two days we've held them.

We'll use a cost basis of 0.72 for the two March 44 puts that I recommended buying yesterday.  They opened at 0.75, but the underlying stock was a tad shy of our 46.04 rally target at the time.  (The intraday low on the puts was 0.68.)  Now, offer two March 39 puts (QQQOM)  short for 0.77 apiece, good-till-canceled.  If successful, we'll hold two bearish put spreads with the potential to produce a gain of as much as $1000 with no possible loss.

Since I'm feeling no fear whatsoever about the possibility of a stock-market collapse, it's probably time to buy some speculative puts.  So that it is not mere "feelings" that inform this trade, we'll use a 50% retracement of the decline from Tuesday's high as a place to get short.  The corresponding number is 46.04,  so buy two  March 44 puts (QQQOR) if and when that number  is closely approached. The puts should  be trading for around 0.72-0.76 if you want to simply enter a limit bid before the opening.

A Hidden Pivot resistance at 46.91 is equivalent to the 1146.50 rally target in the E-Mini S&P.  Let's prepare to short this vehicle if and when it gets to the target by buying two February 46 puts for around 0.75.  That is a very conservative price and assumes the implied volatility for this series will remain constant, but you can pay up a smidgen if you need to.  The target seems likely to provide precise stopping power, and that is why I am not putting a stop-loss on the order.  However, because it is especially difficult here to estimate within a dime or so where the option will be trading, and because the order might fill on a Friday at the closing bell, I have decided not to make it a Pick of the Day trade. For those of you who are new to Rick's Picks, here's the lowdown on Picks of the Day:  [UPDATE:  The Cubes traded no higher than 46.64, so we did nothing on the order.] From time to time, when we spy low-hanging fruit, we offer a Pick of the Day. The goal is to provide very easy trades that will effortlessly make you back the cost of your subscription. They are for traders of all levels of experience, but particularly for discouraged novices who have never cashed a winning ticket on puts or calls. I do NOT track my P&L, since, as you will already know, such statistics are used mainly to trick skeptical traders into buying newsletters. Rarely if ever do subscribers achieve the level of success claimed by their gurus. However, I would encourage you to ask those in the chat room whether they have indeed made money with Picks of the Day. These trades have seldom been losers, but I'd rather you

Friday's peak at 46.01 fell within 0.01 points of the 46.00 Hidden Pivot I'd flagged, but as is so often the case, the target was hit in the final minutes of the session. Shorting there under the circumstances would have been particularly risky, but in any event, I never advise taking a position unless there's enough time to nail down a profit by the close.  Officially I'll assume nothing done, but we can plan on shorting the last of the three targets, 46.91, if and when it's hit.  With any luck, this will occur other than on Thursday with three minutes left before 2009's final bell. _____ UPDATE: 46.28 was as high as the little devil got, so we did nothing.

Buyers of the January 46 puts could have paid as much as 1.11 or as little as 1.06 -- more than I'd anticipated because put volatility surged on yesterday's gap-up opening.  We'll stick with the 15-cent stop-loss in any event, using the low end of the range. That means you should exit the puts on a sell-stop if they trade for 0.91.