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Tuesday, September 23rd, 2008
The market has been moving slightly higher this morning as Congress debates the $700 billion financial rescue package for the troubled credit markets. Wall Street is watching like a hawk to find out the details and there’s a lot riding on how this thing is set up. The Dow is up 22 to 11,038 after rising more than 120 points in the morning. The S&P 500 is trading higher by 2 points to 1,209, and the Nasdaq is in the green by 5 to 2,184.
Our buddy Bernanke urged Congress to get this package through in a hurry and warned “the implications for the broader economy could be quite adverse”…perhaps the biggest understatement of the year. Look, Congress will make this thing work, no matter what the consequences because they can’t announce this big of a package and then not have it go through quickly.
The government is taking some steps in the right direction but the fundamentals for many of the bank stocks and financial institutions are still weak. Yes, there could be a “cleansing” of the books but there will be more pain before it’s full steam ahead.
The dollar is also rebounding today, while gold stocks are taking a breather after Monday’s big advance. Some of the financial stocks we follow are getting to our targeted areas again:
Citigroup (C, $19.15, down $0.87)
Goldman Sachs (GS, $115.94, down $4.84)
Morgan Stanley (MS, $26.84, down $0.25)
Wachovia (WB, $15.04, down $1.56)
If we can get another 10%-20% drop it will be time to go long again on some of these names.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Citigroup, Goldman Sachs, Morgan Stanley, Wachovia
Posted in Financial Stocks, Market Analysis | No Comments »
Friday, September 19th, 2008
Ditto. The market is up ANOTHER 400 points shortly after lunch and for the week the Dow is actually positive. In a week that will go down as one of the most volatile we have seen in quite some time, the market has rallied in stunning fashion on more good news that the government plans to wipe off billions and billions of bad debt off the banks books.
Another factor helping to propel the market higher is the new ban on short selling. I knew the short sellers would eventually get nabbed and today they are paying a heavy price. The SEC placed a temporary ban on the short-selling of nearly 800 financial stocks.
Short-selling is when you think a stock’s price will fall and you borrow the stock from someone else then sell the shares in the open market.
I haven’t even mentioned that today is “quadruple witching” day.
In fact the news is so good right now I can’t believe I waited this long to tell you about Morgan Stanley (MS, $29.60, up $7.05) and Wachovia (WB, $19.40, up $4.90).
Morgan went on a wild ride yesterday and by the afternoon the stock had dipped to a low of $11.70 after hitting a high $24.82. Stop and think about that for a minute. Morgan went from $24 to $12 to now nearly $30 in 24 hours…
I profiled the October 20 calls (MSJD, $10.90, up $3.70) which were at $5 and have now doubled and traded as high as $13.40. The January 25 calls (MSAE, $8.85, up $3.95) were at $4.00 and were over $10 earlier today. I don’t now much higher Morgan can go because the run-up has been huge. You could set stops at $10 for the October calls and easily get taken out due to volatility. You could set one a $7 to allow for some of this but also risk not taking a “double” off the table. Note: I always set stops at a double once the trade is officially over 100%.
Wachovia shares are up over 35% today and the longer-term call options we profiled are also doing well…real well. Wachovia actually OPENED at $23.86 and hit $24. I was pounding the table, beating the drum, and hollering at the top of my lungs that Wachovia was a serious buy-out candidate. The returns on the call options are also incredible.
The January 15 calls (WBAC, $5.80, up $2.48) were at $1.40 and have traded as high as $9.00. The January 20 calls (WBAD, $2.50, up $1.05) were at $0.65 and have traded as high as $4.50.
Obviously you should have closed some of these positions today to protect your profits and keep your bankroll growing. I’ll be wriiting articles here on the blog starting this weekend and my goal is to educate you on numerous option strategies and tidbits on the market. We might even do a mailbag…send me your questions.
Enjoy the rally but don’t fall in love it. As option traders we trade both up and down markets and this rally is being fueled by throwing gas on a fire. How long it burns remains to be seen.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Morgan Stanley, quadruple witching, Wachovia
Posted in Company Commentary, Market Analysis | No Comments »
Wednesday, September 17th, 2008
I profiled a Wachovia (WB, $10.80, down $0.71) option trade yesterday morning shortly after the market opened when the stock was at $10.10. If you are not an option trader or are not in a position to follow the market during the day then it is hard to really get a feel for the volatility that we are going through.
Not many people have the luxury of following the market so when you mention to other people that Wachovia dropped from $20 to $10 within a week, their jaw drops. The real story with Wachovia is that the stock has dropped from a 52-week high of $53 to $10. The massacre in the financials has a lot to do with “credit swaps”, pricing power, borrowing costs, blah-blah-blah. So who really knows what anything is worth?
As an option trader, I try and make sense of what areas are working and which ones aren’t. Wachovia hasn’t had any “bankruptcy” rumors and I think it is a name that can survive. However, it’s like trusting a fat kid with a cherry pie. Will he eat it or will he save it like you asked? It’s the chance you have to take.
The January 15 calls (WBAC, $1.75, down $0.65) were at $1.40 and the January 20 calls (WBAD, $0.85, down $0.15) were at $0.65 when I did the blog. I said at the time “now might be just the right time to play a quick bounce from here.” I only repeat myself because I want you to carefully read what is going on in the market right now, not to toot my own horn or anything like that. It’s hard to write a blog to try and get you a feel for the market…but I am trying.
The point is, look at where the entry prices were at the time of the article and where they CLOSED at yesterday. Before the close, you could have sold the 15′s for $2.40, up from an entry price of $1.40. The January 20 calls could have been sold at $1.00 after an entry point of 65 cents. That’s a 35% profit.
The market is giving us profits faster than the government is printing money. Take advantage of it.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Wachovia
Posted in Company Commentary | No Comments »
Monday, September 8th, 2008
There has been a slew of takeover offers or ones in the works that I wanted to mention this morning. There may be one or two option trades worth researching but the easy money has already been made. However, it is still nice to see the M&A activity picking up. (All quotes are from Friday’s close)
SanDisk (SNDK, $17.64, up $4.18) had a huge day Friday on news that Samsung Electronics is considering an offer for the company. The Korean semiconductor giant already supplies flash memory chips to SanDisk and figures it is getting a great deal. There were twice as much action in the calls than puts and buyers and sellers of these contracts were targeting the 17.50 and 20 strike prices. The September 17.50 calls (SWQIW) closed at $1.30 while the October 20 calls (SWQJD) closed at $1.00.
UST (UST, $67.55, up $13.55) jumped 25% after Altria Group (MO, $20.95, up $0.29) appears set to acquire the chewing tobacco and wine maker for about $10 billion. More than 31,000 contracts of the September 60 calls (USTIM) were traded as they closed at $3.80. The October 70 calls (USTJN) traded nearly 30,000 contracts and could be a sleeper if we get a higher bid. They closed at 90 cents on Friday.
Lehman Brothers (LEH, $16.20, up $1.03) continues to look for a partner as it seeks to secure a much-needed capital infusion. Although Blackstone Group (BX, $16.43, down $0.31) and Kohlberg Kravis Roberts & Company are said to be looking at parts of Lehman’s business model, I still think Lehman gets and oversees bid. The September 18 calls (LYHIL) closed at $1.05 and could see some action this morning. The October 20 calls (LYHJD) could also be worth a second look and are going for $1.10.
Aside from the M&A activity, don’t forget we still have a “half position” open on Citigroup (C, $19.07, up $0.77) and Wachovia (WB, $16.75, up $1.22). The Citigroup January 20 calls (CAD, $2.10) were profiled at $1.37 and we got 50% on the first half of our position. The Wachovia January 15 calls (WBAC, $4.40) were recommended at $3.00 on 8/20 and half was sold at $3.80 on 8/29.
Citigroup, Lehman and Wachovia should all get a pretty good pop at the open as the Dow looks poised to start the session with at least a triple-digit gain. It would be wise to probably sell the other half of our positions as soon as the market opens. I have a feeling people will be selling into the rally as we go.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Citigroup, Lehman Brothers, merger and acquisition activity, Wachovia
Posted in Hot Stocks, Mergers and Acquisitions | No Comments »
Friday, August 29th, 2008
The market has just opened and the financial stocks look like they will be trading lower. I’ve been mentioning four trades that we have going and how they should be closed today. If you still believe these stocks may go higher then you could sell half of your positions and hold onto the rest.
The four trades we looked at involved Citigroup (C, $18.86, down $0.22), Wachovia (WB, $15.67, down $0.32), Fannie Mae (FNM, $7.38, down $0.57) and Freddie Mac (FRE, $4.82, down $0.46)
The Citigroup January 20 calls (CAD, $1.95, down $0.10) were at $1.37 and had posted gains of 50% before this morning’s slight decline. The Wachovia January 15 calls (WBAC, $3.80, down $0.20) were recommended at $3.00 and should do well as Wachovia remains a buyout candidate.
The Fannie May January 5 calls (NJWAA, $4.00, down $0.10) were profiled at $2.40 and are have posted gains of 70%+. The Freddie Mac January 5 calls (FREAA, $1.85, down $0.15) were profiled at $1.20 and are showing a 50% gain.
Again, I’d close half of each position ahead of the holiday weekend. The market is closed on Monday so I’ll be back Tuesday with some fresh ideas.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Citigroup, Fannie Mae, Freddie Mac, Wachovia
Posted in Company Commentary, Hot Stocks | No Comments »
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Morgan Stanley and Wachovia Storm Higher
Friday, September 19th, 2008
Ditto. The market is up ANOTHER 400 points shortly after lunch and for the week the Dow is actually positive. In a week that will go down as one of the most volatile we have seen in quite some time, the market has rallied in stunning fashion on more good news that the government plans to wipe off billions and billions of bad debt off the banks books.
Another factor helping to propel the market higher is the new ban on short selling. I knew the short sellers would eventually get nabbed and today they are paying a heavy price. The SEC placed a temporary ban on the short-selling of nearly 800 financial stocks.
Short-selling is when you think a stock’s price will fall and you borrow the stock from someone else then sell the shares in the open market.
I haven’t even mentioned that today is “quadruple witching” day.
In fact the news is so good right now I can’t believe I waited this long to tell you about Morgan Stanley (MS, $29.60, up $7.05) and Wachovia (WB, $19.40, up $4.90).
Morgan went on a wild ride yesterday and by the afternoon the stock had dipped to a low of $11.70 after hitting a high $24.82. Stop and think about that for a minute. Morgan went from $24 to $12 to now nearly $30 in 24 hours…
I profiled the October 20 calls (MSJD, $10.90, up $3.70) which were at $5 and have now doubled and traded as high as $13.40. The January 25 calls (MSAE, $8.85, up $3.95) were at $4.00 and were over $10 earlier today. I don’t now much higher Morgan can go because the run-up has been huge. You could set stops at $10 for the October calls and easily get taken out due to volatility. You could set one a $7 to allow for some of this but also risk not taking a “double” off the table. Note: I always set stops at a double once the trade is officially over 100%.
Wachovia shares are up over 35% today and the longer-term call options we profiled are also doing well…real well. Wachovia actually OPENED at $23.86 and hit $24. I was pounding the table, beating the drum, and hollering at the top of my lungs that Wachovia was a serious buy-out candidate. The returns on the call options are also incredible.
The January 15 calls (WBAC, $5.80, up $2.48) were at $1.40 and have traded as high as $9.00. The January 20 calls (WBAD, $2.50, up $1.05) were at $0.65 and have traded as high as $4.50.
Obviously you should have closed some of these positions today to protect your profits and keep your bankroll growing. I’ll be wriiting articles here on the blog starting this weekend and my goal is to educate you on numerous option strategies and tidbits on the market. We might even do a mailbag…send me your questions.
Enjoy the rally but don’t fall in love it. As option traders we trade both up and down markets and this rally is being fueled by throwing gas on a fire. How long it burns remains to be seen.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Morgan Stanley, quadruple witching, Wachovia
Posted in Company Commentary, Market Analysis | No Comments »