Watch list for Monday 1/12/09
January 12, 2009 8:23 am Market commentsEK ( long term long)
JOSB – short
GE ended the week near the lows of the week. There was news of GE being at risk of losing its AAA credit standing and if so that it would be very costly. GEs ability to borrow money at the best rates is without question paramount to its ability to generate the kind of profits and dividends that GE has produced in the last few years. I am a seller of GE put options at these prices and feel very comfortable collecting option revenue at the current risk to reward level. For me its like being an insurance company that is insuring against something very bad happening worldwide that will also keep GE down for a long time. The key being that even if there is a shock to the system it will have to have a long term effect to make selling puts a losing proposition. Of course the upside is limited to the amount of premium that I collect, but this type of trading is meant to be a lower risk and longer-term trade.
