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Deep in the Red and Deep into Panic Mode

Sep 17 2008

Deep in the Red and Deep into Panic Mode

 

The markets are deep into the red and deep into panic mode. If you followed the advice given here when the indexes gave sell signals back on the 5th of September, you should be either out of the markets or slightly short of the markets and doing alright.

 

Lehman and Merrill Puts


I was able to purchase some Lehman Brothers puts when the stock was close to bankruptcy and made a little bit of money on the options. More recently I purchased some Merrill Lynch puts a couple of days prior to it being purchased by Banc of America. I quickly sold those puts yesterday when the stock dipped near the opening before the big rally in the stock ensued.

 

AIG Puts


I am currently holding AIG puts at the 2.50 strike price for the month of October. I am a little disappointed with the stock down 35-40% today the puts have fallen in price. It appears that the markets do not believe the share price of AIG will remain below 2.50 for long with the government backing now in place. My risk is very limited so I will continue to hold the position for several weeks to see if the share price weakens.

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