The ProShares Ultra Short QQQ (QID) is a leveraged ETF that moves two times the inverse direction of the 100 largest NASDAQ stocks, the QQQ. The QQQ is rapidly approaching its 52-week high and is due for a pullback given the ongoing uncertainties in Europe, the increasing competition among large NASDAQ companies in the tablet market, and supply-chain interruptions that could be caused by the floods in Taiwan. Over the next few weeks, we will be getting updates from many technology companies on how the fourth quarter is going, and with current expectations now much higher after the recent run, disappointments will be treated harshly.

Buy to open QID Jan. $42 calls at $4.15 or less. A correction in the Nasdaq would mean a jump in the QID. A 5% correction, which would constitute a re-test of the Nov. low, would lead to gains of around 50% on the calls.

Let me also update you on Research-In-Motion (RIMM), which is down sharply after preannouncing that it would fall short of full-year earnings guidance in large part because it is offering such deep discounts on its Playbook tablet to move inventory and make inroads in a competitive market. We’ll talk more about this in the Weekly Update later today, but for now, I recommend you hold on to the Jan. calls because of all the takeover rumors that are swirling around the company. I’ve seen this happen many times before when disappointing news sparks a sell-off but rumors and/or a specific announcement move the stock higher a short time later.