ACTION:

Buy to open the QQQ March 93 puts (QQQ160318P00093000, $1.00, up $0.40) at current levels.

Dear Momentum Options Subscriber,

The technical picture on the PowerShares QQQ Trust ETF (QQQ, $102.25, down $2.15) is showing that a “death cross” is in the process of forming, with the 50-day moving average less than $1 away from falling below the 200-day moving average.

The chart below shows that the 100- and 200-day moving averages have been flat and above $107.50 since mid-November. This is somewhat surprising, as the major indices formed death crosses in January, with the small-cap index confirming its own last September.

QQQ

Short-term resistance is at $105, and Monday’s high reached $104.80. Support levels are at $102.50, followed by $100. A close below par could lead to a test to $97.50-$95. The late-August low reached $84.74 on panic-selling and could also come into play, depending on the severity of a continued pullback.

I mentioned as we entered February that a lower trading range might be coming into play, including the possibility of lower lows. Although premiums are slightly juiced on QQQ put options, there are several ways to capitalize on continued weakness with the chance of making a double- or triple-digit profit.

The regular monthly QQQ March 93 puts (QQQ160318P00093000, $1.00, up $0.40) have jumped 67% on today’s weakness.

These put options are 9% “out of the money” but have over five weeks of time premium remaining. If QQQ shares fall to $91 by mid-March, these options will easily double from current levels. This would require a 10% drop in the QQQs from current levels.

Given the risk/reward, these options offer great downside “protection,” with the possibility of a fabulous return on a return trip to the Aug. 24 low.

 

PowerShares QQQ Trust (QQQ, $102.25, down $2.15)

Buy to open the QQQ March 93 puts (QQQ160318P00093000, $1.00, up $0.40) at current levels.

Action: I like these call options at current levels, and you can use Limit Orders up to $1.10 to get filled.

These are the regular monthly options that expire on March 18, and I will provide the parameters of the trade in tomorrow’s Pre-Market Update.

 

All prices given in this update are current as of 3:35 p.m. EST.

I hereby disclose that I will be participating in the aforementioned trade(s). Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the Open Trades and Closed Trades.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options