Big Rally... Should I Be Buying Protection?

Okay so with this big rally today, I've decided to buy a few call options for the April 70 on BGZ. I purchased the contracts for $520 a piece (plus commissions) and I am protected for 3 to 1 on the downside (large caps- which tracks well with the S&P). Housing sales moved the market just after 10 AM which was very impressive, however I am not convinced we can sustain this rally. I put a stop loss on my calls for $400 a contract expiring today. If we do not blow through the 810 level, we could get down to 750 on the S&P 500 which would be down about 6.6% from these levels, and would put the BGZ up about 20% or to around 77.50. I would want this to happen sooner rather than later if it happens, so I can get out with a decent time value and make even more money on the option. If we get some selling pressure toward the end of the day, I will most likely flip half of my contracts for a gain. If S&P closes up 10-15 instead of 32 or more I will be able to make over 50% per contract today alone. Hope the rally sustains for the bulls out there, I am just not convinced yet...



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