JPMorgan (JPM, $23.75, up $0.55) had another decent day and traded above $24 before finishing Friday’s session 2% higher. The rally in the financials lasted for about the first hour or two of trading but many of the financial stocks ended off their session highs. I’ve been talking about the financials all week and despite the rally, I didn’t want to keep any open positions going into the weekend.
I was thinking of keeping the other 5 option contracts open im my JPMorgan trade but the deciding factor in me closing the trade was Bernanke speaking Sunday night. The Federal Reserve chairman will be on “60 Minutes” this Sunday night and it will be the first interview with a chairman in 20 years. You can almost bet his words will move the market come Monday morning.
He is expected to talk about what went wrong with America’s financial system, how it caused the current economic crisis, and what he plans to do to help fix the economy. In the past, Bernanke has been a disaster for the market but lately he has had a few bright spots.
It’s possible that he will say something very positive on how regulations might change in the future and that could help the financials continue their rally next week. Could Bernanke be the one who really ignites this rally? Yeah, exactly. It’s kind of like playing Texas hold-em with 2-7 off suit. But you can win big pots.
The April 25 calls (JSADE, $1.95, up $0.90) were profiled at 81 cents and I sold half of my position on Thursday at $1.89. The net amount for that was $945. I sold the other 5 calls today at $2.13 and the net amount was $1,065. My average selling price was $2.10 for all 10 contracts. The trade cost $810 to put on. I cleared $1,290. The total return on my $810 was 159%. Not bad for a couple of days work. I didn’t pay commissions because it was a new options account I opened up for the blog. More on that in this weekend’s Weekly Wrap. (Sign up on the right of this page if you would like the newsletter to come straight to email inbox on Sunday nights).
Anyway, I always preach about taking your profits and not to get emotional with your trades. Believe me, I had Gordon Gekko on one shoulder and Bud Fox on the other (characters from the movie Wall Street for you young-in’s…) going into the final hour of trading but didn’t want to risk my profits on a Bernanke national spotlight.
Who knows where the market will open on Monday but keep everything in focus. If the financials keep going up, maybe we play them again. The key thing to remember is that it hasn’t even been a week and there will still be volatility in these stocks. We are almost at a point where it may be worthwhile to start looking at strangle trades on some of these plays. These kind of option trades can be sweet especially given that the fact of how far financial stocks popped this week.
If you got questions, or comments, send them to me over the weekend.
Rick Rouse
Rick@OptionsMentoring.com]]>
