EOT Position Update – May 20, 2009
May 20, 2009
Market Snapshot
After pocketing profits last week, investors seemed to disappear from the market. Monday, however, they were back with a vengeance. Monday’s huge rally though has fallen flat… the market seems unable to hold onto the gains.
The big news this week…
HP missed estimates… no big surprise there. See today’s Dynamic Wealth Report for more details.
The credit card industry is looking at significantly tougher regulations being imposed by Congress. Some of these changes seem very reasonable… though the industry is crying like a little baby.
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.
INTC October 2009 $16 CALLS (NQJQ)
Intel managed to put together a few good days in the market. Today the stock traded above $16 at one point. This call is looking good. Resistance is $16.80 and $19. Support is at $14 and $12.75.
JPM June 2009 $37.50 CALLS (JPMFU)
For a brief time yesterday, JPM traded above our strike price. Then, with the market weakening, they gave up some hard earned gains. We have another month on this option so give it time. Resistance will be at $37.50 and $42. Support is at $28 and $25.
SPLS June 2009 $20 PUTS (PLQRD)
After rallying earlier in the week, SPLS started dropping with the rest of the market. We’re now trading below the strike price which is great news for our puts. I’m expecting this one to continue weakening in the near term… give it a while more. Resistance is $24 and $26. Support is $16 and $14.
GE June 2009 $11 CALLS (GEWFI)
After dropping under $13, GE put together a nice looking rally this week. Only the most aggressive traders should still be holding these options.
Parting Shots…
Is regulation good for the credit card industry?
As I mentioned above, the credit card industry is crying like a bunch of babies over recent government regulations. I read through most of the regulations, and I’ve got to be honest, I like these changes.
It’s not very often I support government regulations, but these seem to level the playing field.
As a consumer, I’m happy. But what about investors? Should we be afraid of investing in the credit card industry right now? Won’t these changes crimp profitability?
All good questions. I have a simple response… don’t worry!
These changes won’t really hurt the industry. It clips their earnings a bit, but don’t forget, the credit card companies make the big bucks off the merchants accepting the cards.
Not many people realize but every time you use a credit card, the card company charges the merchant. These charges range from 2% to 5% of whatever’s being charged. Think of the billions and billions being charged to credit cards… the card companies collect those fees!
A nice business don’t you think? So in short, don’t worry about the credit card industry, they’ll be making even more money before long.
Category: EOT Update
