General Electric (GE) and Citigroup (C)

I closed out on my General Electric (GE) position today making a modest gain.

In addition, I had a Citigroup position in which I closed out as well. The past few days of Citi's increasing stock price was largely due to a short squeeze which I profited by more than 100%. I could have held on to it longer but I do not want to be piggish.

Currently, I am sitting in cash looking for a new opportunity.

Here is this week's economic calender for your review on Yahoo! Finance. Happy trading!

Economic Calender weekending 4/10/2009

Here is the economic calender for weekending 4/10/2009 using Yahoo! Finance economic calender.


Highlight: Jobless claims came in lower than expected with the actual number being 654k verses the 660k expected and 674k prior.

Economic Calender weekending 4/3/2009

Here is the economic calender for weekending 4/3/2009 on Yahoo! Finance.

On Friday the most important Employment Report will be coming out where traders are looking for a -8.5% rate of unemployment. This report comes out the first Friday of every month for the previous month.

This Week's Economic Calender

"The market's master is macroeconomics"- a wise trader once said. Given that I would like to share this past week's economic indicator calender provided by Yahoo! Finance.

As we have seen in the numbers that came out this week, Existing Home Sales and New Home Sales have done better than expected which seems that we have some light coming out of the tunnel in terms of stablizing housing. Durable Goods Orders and Durables Ex-Transportation came out better than expected. GDP still negitive, however did better than expected. As Larry Kudlow mentions, we have "mustard seeds".

GE

On tuesday, I bought shares of General Electric (GE). My rational is that GE has recently had its credit rating cut plus divident slashed to .10 cents a share. The current stock price reflects those fundamentals but if we see a turnaround in those fundamentials e.g. return of top credit rating, return of attractive divident, we will see a nice price return of GE. This is a L-O-N-G term play.

BOA Must Disclose Names of Employees who Received Bonuses

A New York judge ordered that BOA must disclose names of employees who received bonuses under the Merrill Lynch, John Thain era.

You can read the Yahoo! Finance story here

The main argument for Attorney General Andrew Cuomo for the disclosure is to create transparency for taxpayers since it was the taxpayers who paid 45 billion dollars in bailout funds to Bank of America (BOA) but Bank of America claims there is a privacy issue concerning these employees.

In my opinion, I fail to see a reason as to why BOA should release the names. To be honest, what does it do for the economy? What does it do for the capital markets? Does it create jobs? I am curious if Andrew Cuomo is going to release how much it cost taxpayers to retrieve these names?

Updated VIX / APPL Trade

So far the VIX (CBOE Volitility Index ETF) and the AAPL (Apple Inc.) trades are working with only 8 days to expiration left on the contracts that I'm selling. Both stocks are ranging within the parameters that I stated in the previous post and are showing extreme price decay which is what I'm looking for.

Trading AAPL

Looking at the Apple Inc (AAPL) 3 month chart, I noticed that the 3 month timeline low is $78.20 (52 week low- January 20, 2009). At that point when AAPL reached the low of $78.20 NASDAQ was trading at 1440.86 since now NASDAQ is trading at 1377.86 and AAPL is trading at $89.31 I think AAPL will hold above $70.00 within the current month.

With that in mind, I am selling AAPL Mar 09 70 Puts. Again when selling options it is not where the underlying stock is going, it is where the underlying stock is not going.

Trading the VIX

In looking at the VIX (CBOE Volatility Index), I decided to sell VIX Mar 09 60 calls @.85 in order to capture income from the decaying time value of the options (if the option expires out of the money). Looking at the 3 month VIX chart I see a consolidation pattern with support at 37.34 and resistance at 57.36 (intraday highs and lows within the 3 month chart).

Since I'm looking for where the VIX is not going verses where it is going, I feel the VIX will not be reaching 60 in the near term (less than a month). Given that, selling the VIX at 60 seems like the most reasonable trade.

New Lows on the Dow

In another down session in stocks on Friday where the Dow ended down -100.28 (1.34%) to 7,365.67; The NASDAQ down 1.59 (0.11%) 1,441.23 and the S&P down 8.89 (1.14%)to
770.05

Read the full story here: Yahoo Finance Story

Bank stocks led the way down for the indexes for the most part today on fears of nationalization when Sen. Chris Dodd suggested that nationalization of the banking system may be inevitable. Later in the day the stocks rallied to market open levels when "word surfaced that the White House believes the correct way to run the bank system is through private ownership, which likely helped calm fears of bank nationalization." (yahoo finance story)

What do we take from this? The simple notion of bank nationalization is driving fear into the market. It's like what one analyst said on CNBC, is the cure more toxic than the disease. My suggestion is to let these banks go into bankruptcy and from the ashes, stronger and new banks will arise. Further downward pressure on stocks will continue until we have further clarity on what the fate of such banks driving the markets down such as Bank of America (BAC) and Citigroup (C).

Lowest Close Since 2002

Financial stocks led the Dow lower today closing down 89.68 or 1.2% to 7465.95; NASDAQ down 25.15 or 1.71% to 1442.82; S&P500 closed down 9.48 or 1.2% to 778.94

Read the full story here: Yahoo Finance story

Contrary to my previous post, there wasn't a catalyst such as GM going into bankruptcy that sent stocks into that downward spiral but we did however see a breakout on the downside of the Dow and the other major indexes due to the uncertainity in the market about the U.S Government plan to get out of recession. I feel that until we get a better picture of what that plan is, I think we will see more downside of U.S equities.

Dow is testing it's November lows where it's near 7552. If we break 7552 I think we'll see significant downside on the Dow because on the Dow yearly chart, I see a bear flag forming.

At this point, if we have a major catalyst like GM applying for Chapter 11, I think we'll see a significant downside breakout.

Selling 10 USO 37 Calls- Update

My positions 10 USO 37 Call contracts in which I sold is pared well as oil has been fairly steady. I added to my position by selling 5 USO Feb 09'35 Calls again looking for time decay in order to profit.

Selling 10 USO 37 Calls

Today I'm selling options on the USO-US Oil Fund ETF by selling calls which is a bearish strategy.

When selling options, the question is not where the stock is going, but where it is not going. With that being said, I sold 10 USO 37 Calls at 0.25 looking for income from the time decay.

Why bearish? Looking at the one month chart, I see a bearish flag forming making me believe that the price of the USO will go lower in the short term. But keep in mind, the news of the day can dramatically increase the price of oil which in turn will increase the share price of the USO- US Oil Fund ETF. So careful watch of your shorted options positions is a critical due to the unlimited risk involved with selling options. Nevertheless, I have time on my side.