Stock Market
All comments and Stock Market Ananlysis are made by Guy Brumley. Guy has been trading the Stock Market daily since 1992.
Trading, evaluating stock prices and predictions
Market Commentary 3-09-2009
S&P futures are up this morning on news from Citibank. They announced they were profitable for the first two months of the year. (I do not know how they counted the billions the government gave them last week.) Like I said the preannouncements will influence the daily swings, and the market is looking for positives to change the flow of this river. The cable chatter is already proclaiming Citibank is up 12%. Unfortunately, that is only $.15. Bank of America is also up 15% ($.45)
The one stock in this area I mentioned yesterday is GE. The 10 calls for January 2010 look attractive. The calls were selling for $1.20 yesterday, and are listed for $1.47 this morning. This can show how options work. If you were to buy the stock, it will open at 7.80-7.85. To buy 100 shares the cost would be $785 plus commission. That same $785.00 could buy the right to buy 534 shares of GE at $10 through January of 2010.
I could see GE trading $12-$13 in a 1-2 month period, which could yield a $4.00 price in this option. The result 534 x $4.00 equals $2136.00 for a profit of $1351.00 minus commissions for a profit of 172% minus commissions. (Please note one option contract equals 100 shares of stock, so the above example would be adjusted to five contracts controlling only 500 shares.)
The front month (March contract) is too short of a time period to play. The happy story of today can too easily be trumped before next Friday’s close of options.
The market wants to run. The 7500 area is a good target. The question is do we have the time and the impulse to bring in buyers long enough to reach this level. There is 3 weeks until the next earnings reports begin. There will be many more preannouncements, mostly negative. If the market chooses to ignore the warnings and greed can come back, we can finally get a short term and violent rally.
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