The Dow started the morning off in positive territory and has been up and down ever since after waiting to hear details on how Obama’s $75 billion mortgage relief plan is going to work. The plan is designed to help stabilize the housing market and reduce foreclosures and comes on the heels of the just announced housing numbers.

A report earlier this morning said construction of homes and apartments dropped by 17% in January to a record low annual rate. Applications for building permits also fell to a record low of 4.8%.

The uncertainty has provided a good opportunity to get into the Dow Jones Industrial Average Index (DJX, 75.69, up 0.16) March 75 puts (DJXOW, $3.40, unchanged) which opened at $3.10. We were trying to get in under $3.50 and the puts have traded as low as $3.05 this morning. The March 74 puts (DJXOV, $3.25, up $0.35) opened at $2.75 and our entry target was $3.00 or better.

Set stop losses at half your entry price and look to exit at 50% or better.

Rick Rouse
Rick@OptionsMentoring.com