Daily Stock Market Equity and Options Trading Commentary

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Friday, January 23, 2009

Nice to know you Thain

I really liked Mr. Thain... Taking over a company (my favorite Investment bank by the way) that was destroyed by a former CEO, that will not get his name mentioned in my blog, because he is a such a disgrace. Anyway, the key word is liked. And I did until the fact that he wanted his $10 million bonus from a company that he really could do nothing for, other than sell to BAC (which we find out now that BAC was pretty much forced to buy)... Although he gave up the bonus, it should have been a no-brainer! Today as he was let go from BAC I was certainly not disappointed... However I am very disappointed because I have a lot of BAC stock, mostly converted from Merrill Lynch stock I owned, that is worth next to nothing. As I write tonight I am scared that BAC may get nationalized and I'll have no hope of ever getting my money back from BAC. My strategy for this since I hold so many shares is to buy as many as 5x the contracts as I have shares (5 PUT contracts for every 100 shares) for 9-12 months out at the $5-7 PUT region. Yes If BAC is not there than my cost basis will be $2-$3 more a share but if they get that far, without being nationalized, I think (and really hope) they might be in the clear, and I have a chance of making my money, as well as the 2-3 a share back... If they do get nationalized I could see the stock around $1 a share, so I could recover $7 to $10 a share and still have my worthless $1 a share stock... I plan on doing this if we get a nice pop in the market anytime soon, because I would really like to spend less than $100 per contract. If news comes out such as doing away with mark to market accounting (which I think is the best solution), or they make this "bad-bank" then I will not buy PUT protection. Meanwhile for all you investors trying to find the bottom, or waiting for the bottom, in these financials, my strategy would be to sit on the sidelines and buy the stock on the way up, and just forget about the bottom.

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