Signup for our free newsletter:

Lehman Breaks $20... Hands Us 143%...

Written By Brian Hicks

Posted July 8, 2008

We nailed it.

On June 3, 2008, Lehman had just broken $30 support before catching a wave of buying.  But you’d have to be blind not to see that Lehman was in real trouble.  It’s why we recommended buying the October 25 put (LYHVE) right here in your free options blog.

In fact, here’s that original article:

Lehman Breaks $30 Support… Is it headed to $20? How to Play it.

As we said the other day, our goal is to keep you up to date on hot options activity, and stock options to keep on radar.  We’ll show you how to play them, too.

Today is no different. 

It’s only a matter of time before Lehman (LEH) joins the latest list of casualties. Having just broken multi-year support levels, the underlying stock could be headed to $20 near-term.  The best way to trade the possible drop is to buy the October 25 put option (LYHVE).  This is an aggressive trade. 

Concerns are mounting that the brokerage desperately needs to raise more capital.  But, according to The Guardian, “A source familiar with the situation said Lehman had no need to raise capital and would only do so if the right market opportunity presented itself, or if the firm thought it would help investor perceptions. The source said a move to raise capital was only one of “dozens” of options for the bank.”

But we’re not here to pat ourselves on the back.  We just want you to get familiar with gains like this as we get set to launch our all options service.  Look for it.  It’ll be out shortly.

In the meantime, here’s another play to chew on.

Consider buying the Disney October 2008 27.50 put (DISVY).  

One, there are threats of another Hollywood strike.  And two, Lehman just downgraded the entertainment industry and cut forecasts for five companies, reporting that “digital downloads of movies and TV shows posed a huge threat to profits from DVD sales that the companies rely on.”

Seeing that DIS just broke $30 support, the next support level is $28.