OPTION TRADE OF THE DAY!

4-20

Dow Jones- we see the markets failure at breaking the 61.8% Fibonacci Retracement (of the downside) as the possible end of the first leg up in an Elliott Wave Count and are looking for the Dow to digest it recent rally. A normal leg 2 see’s a Fib pull back as deep as 76.4% before the resumption of the upside which would be leg 3. We originally positioned ourselves with the 75/70/65 Put Butterfly back on the 2nd which was a conservative enough position to ride through the topping, if you have that spread you might want to toughen it up by buying back one of the short 70’s and selling a call, creating a bear put spread with a naked leg. Our new idea is using the May option which is based on June, buy the May 7400/7100 put spread and selling the May 8300 call as a naked leg. This trade is currently being bid as a credit of $400, which means that as long as the market is below the naked leg it would be profitable. Above the naked leg there is unlimited risk. The profit potential is limited to the amount of the put spread which is $3000, plus premium collected.

We think this down leg will be quick so we don’t need to be burdened with excess time. As the market dips we will be repositioning ourselves to the upside.

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