Fannie and Freddie Under a Buck

Fannie Mae (FNM, $0.73, down $6.31) and Freddie Mac (FRE, $0.88, down $4.22) did their best Enron imitation on Monday as both stocks plunged to under a dollar. Sure, the government bailout was huge for the market but check out the true winners from yesterday. The Fannie Mae September 2.50 puts (NJWUB, $1.80, up $1.75) were going for a nickle on Friday and they were up a mind-boggling 3,500%. The Freddie Mac September 3 puts (FREUF, $2.20, up $2.05) were up 1,367%. Crazy. Now that I have you back on Earth, in other news…Citigroup (C, $20.32, up $1.25) and Wachovia (WB, $18.99, up $2.24) both had a pretty decent day. The Citigroup January 20 calls (CAD, $2.57, up $0.47) hit a high of $3.00 which gave many of you a double on the other half of the open trade. These calls were profiled at $1.37 and we got a 50% return on the first half of our position and now a 100% return. The baby should have been put to bed yesterday as this option trade is now closed. The Wachovia January 15 calls (WBAC, $6.00) also doubled from our entry price of $3.00. We closed half at $3.80 on 8/29 and the other half should have also been closed yesterday. The calls traded as high as $6.50 and I hated to close this one out. For the 2,347th time, Wachovia is my dark horse to get bought out. Let’s watch the January 20 calls (WBAD, $3.00, up $1.00) and see if they can come back to $2. Research in Motion (RIMM, $102.67, down $4.28) had a little bounce after yesterday’s afternoon blog, gaining about $2 but still finishing lower for the day. We did the 2-for-1 special, buying two October 120 calls (RULJD, $3.65, down $0.95) for every one October 80 put (RFYVP, $2.07, up $0.87). The calls were at $3.22 so we gained 40 cents. The puts also traded higher from our entry price of $1.82 as the premiums got some extra juice due to volatility. We are targeting $5.50-$6.00 for the calls and the puts we will have to play it by ear. We don’t want to sell them too early in case RIMM breaks down from here. Keep checking back throughout the day for more updates. Rick Rouse Rick@OptionsMentoring.com]]>

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