Add BEN Puts

Playing a Void Fill

By Bryan Bottarelli
Thursday, September 03, 2009 2:37 PM EDT
Thu, 3 Sep 2009 18:37:00 GMT

PLAY: Buy the BEN September 95 Puts (BEN US) at or under $4.10, good for the day. Place a protective stop limit at $2.40 and a sniper sell at $6.00.

Dear Bottarelli Research Member,

If you’re a Bottarelli Research LEAPS subscriber, then you’re familiar with Franklin Resources (BEN – NYSE). They operate two primary market segments: Investment Management and Banking/Finance. A brief description of each segment is below…

  • Investment Management: Provides investment management and fund services, including underwriting, custodial, trustee, and fiduciary services to retail mutual funds, institutional accounts, and families.
  • Banking/Finance: Provides retail, banking, and consumer lending services, including automotive lending, retail sales contracts, consumer credit and debit cards, real estate equity lines, and home equity/mortgage lending.

If the financial sector is beginning to unwind, as I’ve mentioned throughout the week, then it’s clear that BEN’s banking/finance segment could fall on hard times. Considering that the company is carrying a forward P/E ratio of 25.97 (compared to the average P/E ratio of 19.02 for competing financial service companies), LEAPS members entered the BEN October 95 Puts (BEN VS) on August 24th for $5.40 per contract. Earlier this week, we sold this position for $8.30, good for a nice 53.70% gainer.

Now here’s the thing…

As I continue to follow BEN, I think we have another nice opportunity to play a fresh round of puts. Case in point, take a quick look at the 60-minute chart below. As you can see, BEN has a really nice downside void that will probably get filled.

BEN

Broaden your view out to a daily chart, and you can really see the downside potential. If the first mini-void gets filled on the 60-minute chart, this could trigger more substantial downside moves. Re-tests of the 50-day and the 200-day moving averages could result in sizable downside weakness. Let’s get positioned to ride this selling pressure now!

BEN

PLAY: Buy the BEN September 95 Puts (BEN US) at or under $4.10, good for the day. Place a protective stop limit at $2.40 and a sniper sell at $6.00.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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