Take SDS Profits

Lock in Quick Hedge Gainer

By Bryan Bottarelli
Thursday, May 07, 2009 9:55 AM EDT
Thu, 7 May 2009 13:55:00 GMT

PLAY: Sell your SDS May 59 Puts (SDS QG) at market, good for the day.

Dear Bottarelli Research Member,

Well, the stress test results are out, and the puppeteers down-played it beautifully. According to the cupcake parameters, J.P. Morgan Chase, Goldman Sachs, MetLife, American Express, Bank of New York Mellon, and Capital One Financial “passed” while Bank of America, Wells Fargo, GMAC, Citigroup, and Morgan Stanley “failed.”

Among the group of failures, roughly $80 billion in additional capital needs to be raised, and the banks have 30 days to figure out how to do it.

The Wall Street Journal asks this morning, “Do the stress test results paint an accurate picture of the financial industry?” I think that answer is rather obvious.

So as it stands, today, the government has done its job (in their eyes, that is). They’ve run their stress tests and released the results in a way that did not shock the financial markets. Perhaps now we can get back to a non-manipulated market?

If that’s the case, then it’s time to lock in profits on our hedge play, which was the SDS May 59 Puts (SDS QG).As you know, we entered these puts yesterday for $2.75 and they’ve traded as high as $4.10 today. Go ahead and sell this play at market now.

PLAY: Sell your SDS May 59 Puts (SDS QG) at market, good for the day.

I’ll follow up later in the session with more updates. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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