(DIA)mond In the Rough: The Dow Should Play Catch Up To the Dax, Bearish Structure With A Potential 9 to 1 Payout Or Simple Vertical With a 4 to1

by Dan September 9, 2011 2:52 pm • Commentary

DIA $109.75    THE DOW WILL PLAY CATCH UP TOP THE DAX

-DAX down 25% ytd and 33% from the April highs

-INDU down only 5% ytd and 14% from April highs….

Many of the 30 Dow components receive at-least 10% of their revenues from Europe coupled with the Dollars recent rally vs the Euro this could make profits tough to come by in Europe for a while.

( 16 names get more than 25% of their revenues from Europe, and another 8 get atleast 10%) Tech pharma and consumer most exposed….. with IBM, HPQ, JNJ PFE, UTX KFT and MCD all in mid 20s.)

DIA BUY OCT 105/100/95 Put Fly for .50

Buy 1 Oct 105 Put for 3.35

Sell 2 Oct 100 Puts for a total of 4.20 (2.10 each)

Buy 1 Oct 95 Put for 1.35

Break-Even on Oct Exp:

Profits: btwn 104.50 and 100 make up to 4.50, at 100 make full 4.50, btwn 100 and 95.50 profit trails off.

Loses: above 105 and below 95 lose .50, btwn 104.50 and 105 lose up to .50 and btwn 95.50 and 95 lose up to .50

OR A MORE SIMPLE VERTICAL WITH A 4 TO 1 PAYOUT POTENTIAL…

TRADE 2:  DIA $109.35   BUY OCT 105 / 95 Put Sprea for 2.00

-Buy Oct 105 put for 3.50

-Sell Oct 95 Put at 1.50
Break-even on Oct Exp:
Profits btwn 103 and 95 make up to 8.00, below 95 make full 8.00
Loses btwn 1-3 and 105 lose up to 2.00 and above 105 lose all 2.00