• Market:  February 2006 Dow Jones Industrial Average (DJH6) *February options trade based on the March futures contract.
• Tick value: 1 point = $10.00 
• Option Expiration: 02/17/06   
• Trade Description: Bear Put Butterfly Spread
• Max Risk: $500.00
• Max Profit:  $2500.00
• Risk Reward ratio 5:1

Buy one March 2006 Dow 10,900 put, sell two February Dow 10,600 puts, and buy one March 2006 Dow 10,300 put , for a combined cost and risk of 50 points ($500.00) or less to open a position.

Technical/Fundamental Explanation
Those of you who have been following our newsletter know that we are expecting to see the "January effect" begin to die off. While the first two weeks in January are seasonally strong the second two weeks can be quite weak. The models that we use are showing a high probability that by mid February the stock market will be much lower than it is now in mid January. There are a few other things to back this up. I already mentioned the seasonal trend being lower. The Commitment of traders reports show the small investors getting rather bullish here in the last few weeks. (Is there any better sign of a temporary top than John Q public wanting to get involved?) We expect to see an orderly sell off that takes the Dow back towards 10,500 over the next 30 days or so. Overall this is one of the cheapest ways to be short the stock market for the next 30 days, while getting 5 to one on your money.