Goldman Sachs (GS, $87.70, up $9.44) and JPMorgan (JPM, $27.66, up $2.60) added to their gains in late-afternoon trading. Both stocks continued to surge after the update in today’s blog and hopefully that will carry over into Thursday.
However, futures are trading lower despite the $820 billion stimulus package that was approved. As I type, the Dow futures are off by 37 points, while the Nasdaq futures are lower by 7. The classic “buy the rumor, sell the news” could happen when the opening bell rings which means these trades will have to watched as soon as trading begins.
The Goldman Sachs February 85 calls (GSBQ, $7.85, up $5.00) traded as high as $8.70 which is over a 80% gain from a $4.75 entry price. If the call options go below $6.50 or so, close the position.
The JPMorgan February 26 calls (JSABI, $3.20, up $1.50) opened at $2.50 and traded as low as $2.35. Stops could be set at $2.75.
Some of you may have closed the trades yesterday but if you didn’t, hopefully you won’t get whipsawed out of them without making a profit. A couple of things to take away from this trade. First, it was a risky trade with inflated option premiums and second, don’t fall in love with the position.
We are looking for quick trades that work and this was a rare occasion where the market showed its hand and gave plenty of clues on what it was betting on. Kinda like poker. We won a pot and we fold on other trades until we see something we like…
Rick Rouse
Rick@OptionsMentoring.com