The Dow took another step closer to falling below 7,000 yesterday as bears took control of the market shortly after the opening bell. The market started off in positive territory following word the government may help Citigroup (C, $2.14, up $0.09) but the rally was short-lived. The Dow dropped 250 points, or 3.4%, to finish at 7,114. The last time the Dow traded below the 7,000 mark was in October 1997.
The S&P 500 dropped 27 points, or 3.5%, to close at 743 while the Nasdaq tanked 53 points, or 3.7%, and ended at 1,387.
And you thought it couldn’t get any worse, right? Despite the market’s woes, we still managed to have a heck of a Monday.
Research In Motion (RIMM, $37.42, down $1.73) continued its selloff as the stock lost another 4%. The 52-week low for RIMM is $35 and the stock is giving all the signs that it wants to go lower. It remains to be seen if support will hold but we already have two huge winners with a couple of put options that were profiled last Wednesday.
The March 40 puts (RUPOH, $4.70, up $1.00) were profiled at $2.15 and hit a high of $4.75 on Monday. The return on the trade is nearly 120%. The 25% gain now allows you to set a stop of $4.30 on the trade if you didn’t close it yesterday. A stop of $4.30 gets you a 100% return. The March 35 puts (RUPOG, $2.10, up $0.50) were recommended at 85 cents and stops can be set at $1.90. The trade is up nearly 150%.
I had mentioned if the RIMM put options traded back to 100% returns to sell them on Monday. We got more than that and then some. The stops are set at 100% return so make sure you set them.
The Dow Jones Industrial Average Index (DJX, $71.15, down $2.51) also did very well. The March 75 puts (DJXOW, $5.25, up $1.40) and the March 74 puts (DJXOV, $4.80, up $1.30) surged as the day wore on. Both trades are now up 70%+…stops are set at $3.85 on the March 75’s and $3.25 on the March 74 puts. Rick Rouse Rick@OptionsMentoring.com]]>