A Tale of Two Indices

by Bryan Bottarelli

Look for a massive divergence in the Dow and the NASDAQ in 2002. As Adam points out, the Dow will not "officially" touch a firm bottom until 6,315. On the flip side, the NASDAQ, having already bottomed out, will rally back up to 3,500.

Do you think that’s a bold claim? NASDAQ up, Dow down? Call it what you will, but I’m sticking with Adam’s forecast. Since I joined up with him to run Options Underground, our NASDAQ 100 trading service, Adam’s forecasts have been sharper than Bill Clinton’s pickup lines at a Hugh Heffner celebrity roast.

If Adam says the NASDAQ’s going up and the Dow’s going down, I’m not here to question it. I trust the guy. (I personally think he wakes up in a pool of lukewarm sweat, dreaming of Japanese candlesticks lines, but that’s beside the point.) Why? Just look at our track record since teaming up. We’ve helped our traders run up a track record of 24 winners out of 28 total trades since May 16, 2001.

Touch them all…the markets are crossing

Adam calls the forecast, I play the options. You make money. So, let’s get on with it. Adam did his part, and now I’m here to show you how to profit off the forecast. But before I give you some concrete advice, I’d like to throw in a 2002 forecast of my own. I call it:

The return of the pure options trader

Options trading is an art form. In fact, trading in general is an art form. And I’m not talking about day trading. That was simply a market trend that ballooned faster than Oprah’s waist size… and exploded in a mess of cellulite and blown-out E*Trade accounts.

That’s not what I’m saying. I’m talking about a systematic, well-executable options trading strategy that can make you small, consistent gains. Small, consistent gains with options, you say? I know, I know. You probably think of options as fast and unpredictable. And that’s the beauty of my new prediction. In 2002, you will become more sophisticated at learning new investment strategies. More specifically, you’ll learn how to trade options effectively. And you’ll uncover a new and consistent money-generating machine.

Turn sloppy wet into clean dry

Allow me to illustrate this idea with my first options recommendation for the year 2002.

Buy the Dow Jones December 100 LEAPS between US$10 and US$13 a contract. The symbol for this option is ZDK XV. This gives you the right to sell the DOW for 10,000 anytime before December 2003.

Here’s more background info…

This option is a Dow put. It will increase in value as the Dow goes down. And since it’s a LEAPS option (Long Term Equity Anticipation Securities), you have until December 2003 to cash it in. If the Dow falls to 6,315 as Adam predicts, this option will have a conservative estimated value of US$35, netting you a 350% gain. Not too shabby.

This is a long-term option with a long-term outlook. (And when I say long term, I’m talking two years, max). If you think the Dow is set to fall faster than Chris Farley after a 6-day bender, then the Dow Jones December 100 LEAPS (ZDK XV) is what you want to play.

As for the NASDAQ…

Well, you have to log onto www.indxtrader.com and sign up for Options Underground for that kind of information! But just to whet your appetite, here are…

Some other stock odds and ends for you:

Have a prosperous 2002!