In preparation for our eventual all-options letter, we’re warming up in The Options Pit blog.
While we don’t often provide free trades in our blogs, we did make mention of these five.
On June 3, 2008, Lehman had just broken multi-year support. We mentioned that the "best way to trade the possible drop was to buy the October 25 put options (LYHVE)." At the time, the option traded at $3. Today, as LEH breaks $25 to the downside, the put option trades at $4.55 – a 52% gain in days.
On June 10, 2008, Wall Street was bracing itself for further UBS writedowns. Considering the held $15 billion in subprime securities and $17 billion in Alt-A, further downside was a no-brainer. It’s why we made mention of the September 22.50 UBS put (UJWUX). The UBS put traded for about $1.30 yesterday. They now trade at $1.50.
While the next three positions didn’t come with a mention of a buy, we did receive mentions of what some of you bought.
On May 28, 2008, we recommended that you keep an eye on Expedia (EXPE) following rumors that Barry Diller was looking to take the company private. But as with all rumors we urged caution, saying, "While call activity may indicate bullishness, be cautious of following the rumor." Had you bought the Expedia October 22.50 put (UEDVX), for example, around $1.80, you’d be up 56% today as it passes $2.80.
We also made mention of Coca Cola Enterprises (CCE) that day, as "another one for the radar screen," saying "You know things have gone economically awry when people aren’t buying Coke any one. The company just reported that trends have ‘continued to limit volume performance in North America, particularly in higher margin 20-oince packages of sparkling beverages and water, negatively affecting operating income.’"
Had you bought the November 20 put (CCEWD), for example, around $1.05, you’d be up about 60% today as it passes $1.70.
And on June 2, 2008, we mentioned that "Lumber and wood producer Masco Corporation (MAS) is seeing its third day of call option buying activity. But don’t be so quick to buy." Understandably, investors wanted to load up behind the Chairman because they believe the U.S. real estate market will bottom this year. It’s won’t happen, though.
Had you bought the MAS October 20 put, for example, around $3 that day, you’d be up about 27%.
Not a bad start considering we’re just getting warmed up.
