EOT Position Update – March 4, 2009

| March 4, 2009

March 4, 2009

NOTE:  Watch for a new trade in the next 48 hours!

Market Snapshot

Can you believe we’re below 7,000 on the DOW?  This is absolutely amazing.  We broke lower all week, then the market moves up significantly today.  As they say, one point does not a trend make!

The big news this week…

Automakers continue to be decimated.  GM announced this week their sales declined 50% from last year.  Bad news for GM, great news for our Toyota Motor puts.

AIG continued to take advantage of taxpayer generosity.  This week they announced a loss of more than $60 billion.  Uncle Sam rode to the rescue with another $30 billion loan.  Seriously, cut them off, let them fail.

General Electric cut its dividend and the stock hit 18 year lows.  Citigroup converted their government investment into stock.  Taxpayers now own around 36% of the company.

The banks started the stress test… let’s see who’s first to break!

Now for the trade updates.

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  I try to focus on the positions that have some significant news or price movement.

  WPI May 2009 $30 CALLS (WPIEF)
This was ugly.  With the market plunging to new lows, the shares of WPI followed right along.  We fell below the first support level and almost crossed the second.  I still believe in this trade, but only the most aggressive traders should still be holding. Resistance levels will be at $31.50 and again at $33.  Support levels are $27 and $25.

  TM April 2009 $55 PUTS (TMPK)
This was a nice bright spot for us.  The bad news out of GM this week on sales (along with the market) helped push TM below $60 at one point.  This is important to note, we broke the second support level.  Everyone should have a small profit on the trade. We still have over a month and a half before expiration on the option so if you’re aggressive hold on.  Otherwise, bank your profit now.  Resistance levels are $72.50 and $75.  Support levels are $62.50 and $60.

  ORCL June 2009 $19 CALLS (ORQFT)
The market hasn’t been kind.  We crossed both support levels.  I still like the fundamental reasons behind the trade (earnings in March).  Unfortunately, our timing… and the market seem to have worked against us.  If you’re really aggressive hold this one, we might see some upside on the earnings.  Resistance levels are $18.50 and $20.50.  Support levels are $16.50 and $15.50.

  EMC April 2009 $11 CALLS (EMCDM)
EMC traded as low as $10 this week.  Resistance levels will be at $13.00 and again at $14.25.  Support levels will be at $9.50 and $8.50.

Parting Shots…

General Electric Bankrupt?

In this market I guess you can’t take anything for granted.  For example, I’d have thought the idea of GE going bankrupt would be ludicrous.  But more than one person thinks it’s a possibility.

Just look at recent options activity on the stock.

An inordinate amount of put options traded at the $2.50 strike!  That means investors were placing trades that would be profitable if GE was below $2.50… That puts the company on track for bankruptcy.

I’d have never thought a bankrupt GE would be possible.  I guess in today’s market we need to question everything!

Category: EOT Update

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