Short plays?? Thoughts...

[al_bundy]

financial will probably be a good short again come 3Q

the visa money will be spent, they will have to repay the fed, foreclosures for the 2008 resets will start to rev up and a lot of other good news

[clifp]

Originally Posted by Art G

I guess it depends on where you got in. I'd be careful, the government seems to want to do whatever necessary to bail out these companies.

Exactly.

Final Jeopardy Question
Name a Central banker, Fed Chairmen, or Tresaury Secretary who hasn't worked for a large bank or financial firm for a least a decade.
Answer Who is No one?

Alexis Trebic: That's right they all have.

Which means that if they have to hook up turbocharger to the print pressing to add liquidity they will. Ditto allowing major banks to issue loans backed by Uncle Sam . Negative interest rates not a problem.

You think the US military has firepower, just wait tell you see the Fed, Treasury, and Wall St pull out all the stops to prevent their fellow bankers from being hosed. You can argue all you want that this a dangerous precedent, unfair etc. but fighting the fed by going short banks for a long period, best of luck.

[chinaco]

Yes...

Since you asked -- Don't do it unless you really know what you are doing.

Of course, if you have some play money and want step up to the roulette wheel to try your luck... have fun.

[Hamlet]

I think financials are going to be going up a lot for the next 6 months. I think that the Fed has removed any liquidity concerns any of them have had.

However, I think that eventually, some of the bad banks are going to face solvency issues that the Fed can't resolve without simply buying the bad loans, which I hope they will refrain from doing.

I expect to see a separation in performance between the bad players and the good players when that happens, but for the next six months I bet the bad banks outperform the good.

Some of these players will go bankrupt in the end, though, and should. If the Fed actually starts buying the loans, I'm going to start frothing at the mouth.

Disclosure-- I own UBS and TCF.

Originally Posted by clifp

Exactly.

Final Jeopardy Question
Name a Central banker, Fed Chairmen, or Tresaury Secretary who hasn't worked for a large bank or financial firm for a least a decade.
Answer Who is No one?

Alexis Trebic: That's right they all have.

Which means that if they have to hook up turbocharger to the print pressing to add liquidity they will. Ditto allowing major banks to issue loans backed by Uncle Sam . Negative interest rates not a problem.

You think the US military has firepower, just wait tell you see the Fed, Treasury, and Wall St pull out all the stops to prevent their fellow bankers from being hosed. You can argue all you want that this a dangerous precedent, unfair etc. but fighting the fed by going short banks for a long period, best of luck.

[Hamlet]

I meant USB and TCF. I don't own UBS.

Originally Posted by Hamlet

I think financials are going to be going up a lot for the next 6 months. I think that the Fed has removed any liquidity concerns any of them have had.

However, I think that eventually, some of the bad banks are going to face solvency issues that the Fed can't resolve without simply buying the bad loans, which I hope they will refrain from doing.

I expect to see a separation in performance between the bad players and the good players when that happens, but for the next six months I bet the bad banks outperform the good.

Some of these players will go bankrupt in the end, though, and should. If the Fed actually starts buying the loans, I'm going to start frothing at the mouth.

Disclosure-- I own UBS and TCF.

[clifp]

I think you maybe right about bad banks outperforming good ones. My Countrywide stock is up more than any other bank/financial stock I've purchased.

I've been writing puts on USB for the last several months, one of these days I'll buy it at price at like to own at (<$30)

[Hamlet]

By writing puts, you mean that you're giving someone the right to make you buy the stock for the strike price, correct?

What strike price and lead time to you use? What kind of premium do you get for writing the puts?

USB hasn't struck me as a real volatile stock. I wouldn't think the premiums would be very high, but then I've never bought or sold options (except company provided ones )

On the plus side, I guess this is a nice income stream with a downside of being forced to buy a quality stock at a good price. The only real risk is a horrible Enron style surprise in the stock.

Originally Posted by clifp

I think you maybe right about bad banks outperforming good ones. My Countrywide stock is up more than any other bank/financial stock I've purchased.

I've been writing puts on USB for the last several months, one of these days I'll buy it at price at like to own at (<$30)

[clifp]

Originally Posted by Hamlet

By writing puts, you mean that you're giving someone the right to make you buy the stock for the strike price, correct?

What strike price and lead time to you use? What kind of premium do you get for writing the puts?

USB hasn't struck me as a real volatile stock. I wouldn't think the premiums would be very high, but then I've never bought or sold options (except company provided ones )

On the plus side, I guess this is a nice income stream with a downside of being forced to buy a quality stock at a good price. The only real risk is a horrible Enron style surprise in the stock.

Yup you've pretty much got it correct. I stick to quality banks and blue chips like GE cause I am happy to own GE at near historically high 4%+ dividend if my put gets exercised

In the case of USB it didn't use to be a particularly volatile stock, but
times have changed.

Back in Aug when USB was ~$30 at I got a $1/share for a $25 USB put that expired in Jan. (21 weeks) In middle Jan USB was $33 and the premium was $.95 for Feb put (7 weeks). I'll probably sell a June 30 next for >$1 premium. It ain't a way of getting rich fast, still a ~$1,000 a shot adds up.


Of course it doesn't protect against a bear market, B of A zoom past my $50 puts last year and hasn't been close to recovering. I've pretty much replaced limit buy orders with writing puts, since commissions only run ~$15 per transaction, spreads are $.05 and I almost always writes options don't buy them.

I also write covered calls at prices above my/morningstar's fair value. This month Compass Material got called away, but considering what a terrific performer it was I am not upset.