The financial stocks opened strong this morning despite the fact that futures were sharply lower this morning. Also, the $700 billion financial bailout package was scheduled to be unveiled today, but that got pushed back until Tuesday as Congress focuses on the stimulus bill. Here is a look at the trades left open from Friday with updated stops.
It would be wise to take a majority of these profits off the table ahead of Tuesday’s announcement. I’m not sure if these stocks will continue higher or if we get the “buy the rumor, sell the news” curveball. I would hate to see you give up 50%-200% gains by trying to squeeze a few extra dollars out of the trade.
Bank of America (BAC, $6.92, up $0.79)
The February 6 calls (BYOBF, $1.65, up $0.50) could have been entered on Friday for under $1. They are up nearly 70%.
Goldman Sachs (GS, $95.70, down $0.87)
We entered the February 100 calls (GSBT, $3.60, down $0.40) for $3 and they traded as high as $4.60 this morning. At $4.50, that was a 50% return which is where our initial target was. The calls have slipped since then but are still up 20% from your entry price.
JPMorgan (JPM, $26.90, down $0.73)
The February 25 calls (JSABE, $3.50, down $0.50) were profiled at $2.45 and JPMorgan has struggled this morning. If you close the position now, you still have a pretty decent return of 40% or so.
Visa (V, $55.92, up $0.51)
The February 55 calls (VBK, $2.20, up $0.10) continue to amaze and were entered the day before earnings at 60 cents. I would close at least 75% of the trade right now and let the rest ride. The return is over 250% and whatever you let ride could add even more to your bottom line. Even if the calls stall from here, the other 25% you left open can be closed if the calls lose momentum.
That is where we are and it is up to you to decide how much exposure you want going into tomorrow’s noteworthy event. Remember, it’s better to take steady profits when it comes to options trading instead of swinging for the fences on every trade. Sure, I’m dying to see how far Bank of America could go, or if Goldman will break $100, but giving up the gains I have now isn’t worth it. We have left some on the table but the euphoria will soon wear off and the options traders that get in late will get burned.
Rick Rouse
Rick@OptionsMentoring.com
