Let’s go over the report card for the Financial sector and see where we stand as far as it concerns some of our LEAP options. Wells Fargo (WFC, $27.86, up $0.03) started things off by beating Wall Street’s expectations and actually reported pretty decent numbers. The stock was at $21 on Monday. JPMorgan Chase (JPM, $40.02, down $0.78) is back over $40 again after starting the week at $31.
Merrill Lynch (MER, $30.91, up $0.18) rallied $5 for the week despite posting a $5 billion loss. This was a bigger-than-expected loss of $4.7 billion but nonetheless Merrill pretty much made out okay don’t you think?
Citigroup (C, $19.35, up $1.38) posted a second quarter loss of $2.5 billion but the loss was considerably lower than what the Street was expecting. Goldman Sachs (GS, $182.84, up $1.60) also made a nice $30 recovery after touching $152 on Tuesday. Fannie Mae (FNM, $13.40, up $2.47) and Freddie Mac (FRE, $9.18, up $0.85) also had big weeks as both DOUBLED off the lows they hit Tuesday.
Here is an update on the 2009 LEAP call options we looked at. While these options don’t expire for another six months, we would be foolish not to ensure at least a profit of 50%. Notice the stops put in place.
The Citigroup January 20 calls (CAD, $2.35, up $0.60) were at $1.25. These calls are almost in-the-money and if the stock can get over $20 the options should trade hand in hand with the stock. Set stops at $1.90.
Goldman is the one stock I want to trust but it would be a push for the stock to test its 52-week high of $250 anytime soon. The Goldman Sachs January 260 calls (GPYAC, $1.28, down $0.44) were at $1.07 but fell 25+% Friday although the stock was slightly up. These calls really should have been sold already as they are way out-of-the-money but even a stop of $1.25 gets a 20% return.
Like a tide that lifts all boats, the Merrill Lynch January 35 calls (MERAG, $2.85, up $0.12),which were at $1.90, benefitted from the rally. Merrill is doing its best to shore up its balance sheet and the calls are up exactly 50%. Set stops at in the $2.65-$2.75 area.
Wachovia (WB, $12.97, down $0.47) lost a little momentum Friday after hitting a high of $14.36 but the January 15 calls (WBAC, $1.93, down $0.47) are still up about 50% from a $1.30 entry price. Stops should be set at $1.75.
It would be nice to see these gains extended but if we don’t you shouldn’t let it bother you. It’s nice to hit a few singles instead of hoping for the homerun. The homer may still come but at least if we are stopped out we score some respectable gains.
Rick Rouse
Rick@OptionsMentoring.com
