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Would like some opinions on banking stocks

Anything related to investing, including crypto

Rawr

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GDP numbers out 8:30am an hour before mkt opens. Its going to be bad that's why the market sold off today. Now the question is will the bad news be bought or sold. If buyers come in it'll be a very positive sign.


You know, now that I think about it, I am not worried. Plus there is this, I think you were right - financials will move up a bit, before collapsing soon after.

Government to unveil menu of bank fixes next week: source | Reuters

And I discussed in Schiff's thread that I'd like to move to gold ASAP so once I am out of this I'd like to do that.
 
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randallg99

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SKF goes up only 13% while the largest financials (by market cap) go down by 8%+???

that's exactly what used to piss me off when I traded it.

by the way, the "bad bank" is starting to be percieved as a bad idea and the concept is losing steam and might not happen afterall.... look out below
 

randallg99

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And I discussed in Schiff's thread that I'd like to move to gold ASAP so once I am out of this I'd like to do that.


do you think we are entering a deflationary period? or inflationary period?
 

Rawr

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SKF goes up only 13% while the largest financials (by market cap) go down by 8%+???

that's exactly what used to piss me off when I traded it.

by the way, the "bad bank" is starting to be percieved as a bad idea and the concept is losing steam and might not happen afterall.... look out below


Just read that. Fas is already down in after market. I don't know whether to get out now or there might be a chance tomorrow for something to happen.

Can financials go any lower??? (before commercial defaults)
 
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randallg99

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Just read that. Fas is already down in after market. I don't know whether to get out now or there might be a chance tomorrow for something to happen.

Can financials go any lower??? (before commercial defaults)

yes. zero.
 

kidgas

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OK, so here is what I would do with something like FAS (in fact, I like it so much, I just may do it tomorrow in my retirement account):

First, I admit that I don't know if it is going up or down but that it is volatile.

So, I purchase the Jul 10 puts and try to get them about 4/share. Purchase enough to cover double the number of shares you intend to purchase. If you want 500 shares of FAS, you would buy 10 put contracts. Then I would try to get the FAS shares at 10/share or lower. Then, I would sell the March 12.5 calls at 2/share or higher. You may have to wait a day or two, but with the volatility it could happen easily.

What have you done? You have shares at a basis of 10 + 4*2 - 2 = 16. But they would get called at 12.5. That sure seems like a lousy deal. Remember, those July puts would still have some value. As long as they are worth more than 1.75/share, you have made profit. If FAS somehow spikes to 15, buy back the Mar 12.5 calls with a few days left and sell the Apr for the time value. This lowers your basis each and every month.

Now, why did I buy double the puts? What if FAS drops to 7 the next day after your purchase? Now you can buy those shares to average down and you get this:

10*500 + 7*500 + 4*1000 - 2*500 = 11.5/share basis. You have 500 shares free to sell calls on.

Or you could just sell half the puts for a profit to lower you basis.
 

AlwaysCurious

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Can financials go any lower??? (before commercial defaults)

Actually low prices are misleading with their absolute value. Remember that at any given price (except for 0) it can tank another 50%, and another, and another...
 
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kidgas

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OK, so here is what I ended up doing in my retirement account this am:

I purchased 10 July 7.5 puts on FAS for 2.65/share and purchased 1000 shares of FAS for 10.20 per share. My basis is now 12.85. I also put in an order to sell 10 Feb 12.5 calls for 1.55. It doesn't look promising that it will happen today. I will give it next week and see what happens, then take what I can get to lower the basis. I have six months to play the volatility selling calls on spikes and buying back on declines. I will try to update.
 

randallg99

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time and time again I'll say that unless you are a gambler or you are trading momentum then STAY THE HELL OUT OF THE BANKING SECTOR if you want to preserve your capital.

BAC (bank of America) among others hitting multi decade lows... and this is in light of "good news" about the Obama economic stimulus plan thrown at it....
 

Rawr

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time and time again I'll say that unless you are a gambler or you are trading momentum then STAY THE HELL OUT OF THE BANKING SECTOR if you want to preserve your capital.

BAC (bank of America) among others hitting multi decade lows... and this is in light of "good news" about the Obama economic stimulus plan thrown at it....

I've heard two things, no idea if they are true.

1. BAC is going to be the bad bank

2. BAC drops to 3.8 where GS buys it.
 
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randallg99

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I've heard two things, no idea if they are true.

1. BAC is going to be the bad bank

2. BAC drops to 3.8 where GS buys it.


they are unfounded rumors and BAC is at this juncture getting more likely to become nationalized despite all the naysayers.... the financial sector is still very, very risky. If you are going to make big money in the market, you best be avoiding the riskiest sectors.

nice summary here:

StreetInsider.com
 

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cfittowin

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BAC sank to $3.77 today and then rose to over $5 in after market trading. I went in at $4. You have to know when to hold them and know when to fold them. Many will call me crazy and maybe that is a fair assessment, but I pulled the trigger. Sure there is the risk of nationalization and I understand this risk, but the risk/reward is too great to pass up. Financials will lead out of this recession if history has taught us anything.

Cheer up everyone, tom. is another day
 
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Rawr

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I will be keeping quiet until next week, then I'll post some stuff I think about these ETF's.

Tomorrow and Monday should be interesting.
 

randallg99

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BAC sank to $3.77 today and then rose to over $5 in after market trading. I went in at $4. You have to know when to hold them and know when to fold them. Many will call me crazy and maybe that is a fair assessment, but I pulled the trigger. Sure there is the risk of nationalization and I understand this risk, but the risk/reward is too great to pass up. Financials will lead out of this recession if history has taught us anything.

Cheer up everyone, tom. is another day

the liquidity is making trading this stock very easy... I am seeing 100k blocks trade often.... are you using any metrics to determine your buy and sell points?
 

cfittowin

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More often than not, especially in today's market, you tend to always find varying degrees of correlation with single and variable analysis metrics, but really end up lacking a causation adequate enough to make an informed investment decision. Simply put, I am rolling the dice Randall.

From an article in the WSJ this morning:
Analysts debated Thursday whether the bank could in fact be a candidate for nationalization. Raymond James analyst Anthony Polini called concerns about nationalizing Bank of America "absurd." The stock has been driven so low that "fear itself does the work for you," he said. "After a while, even the most rational, intelligent investor starts to think, 'I must be wrong, there must be some truth to this, the stock keeps going down.'"
 
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kidgas

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Here is the promised update on my trading of the FAS ETF:

I took advantage of the rally yesterday to sell the Feb 12.5 calls on FAS. Although it hadn't hit my original sell point of 1.55/share, I felt that I needed to get what I could to offset some of my expenses and essentially sell the rally since I can't be sure that it is sustainable. I ended up selling the Feb 12.5 calls at 1.10/share. Overall my position looks like this:

Long 1000 shares FAS
Long 10 Jul 7.5 puts
Short 10 Feb 12.5 calls

My basis including commissions is 11.79/share. If the rally continues and FAS is called, great...I made some money. If not, I will sell calls again in March and again and again til July. Will keep this thread posted on this one position.
 

kidgas

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I used to downdraft to purchase more FAS. First, I bought some Jul 5 puts, and then picked up more FAS at 8.65/share in the afternoon. My new basis is 10.93. On any major rally, I plan on selling either March 10 or 12.5 calls depending on the strength. I may have to wait several weeks but I am patient.
 

bflbob

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Wow... so who was short bank stocks going into today? ;)

I was. Here are my current shorts and today's change...

DFS - Discover Financial -- down 11.93%
EQR - Equity Residential -- down 10.06%
JPM - JPMorgan Chase -- down 9.20%
IPG - Interpublic Group -- down 7.26%
FDX - FedEx -- down 6.27%
THC - Tenet Healthcare -- UP 2.32%

Unfortunately, nothing hit my cover points, since most were up yesterday.

In fact, I saw a flip today.
Yesterday, almost every long position I had was profitable, and shorts were losers.
Today, the shorts are all profitable, and all but one long are losers.

Net effect, I was down 1.19% for the day.:notworthy::thankyousign:
 

Rawr

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Not much help to banking stocks and the speech didn`t say anything.

I am holding for awhile
 
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imirza

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Wow... so who was short bank stocks going into today? ;)

I am short a dozen or so banks plus a bunch of REITs. I really should have covered at the close. But I like pushing my luck. If things go my way, I expect all bank stocks to be trading at 0 before the year is over. Whenever I think about covering, I remind myself of my LEH (lehman) short from $45 that I covered at $25. I could have ridden that to zero. I still have FNM short which I never bothered covering. Rode that from $8 to zero.
 

Rawr

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I am short a dozen or so banks plus a bunch of REITs. I really should have covered at the close. But I like pushing my luck. If things go my way, I expect all bank stocks to be trading at 0 before the year is over. Whenever I think about covering, I remind myself of my LEH (lehman) short from $45 that I covered at $25. I could have ridden that to zero. I still have FNM short which I never bothered covering. Rode that from $8 to zero.


I also think they are going to 0, but short term rally might happen. Didn't you also expect things to be good till March?
 

randallg99

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Chris Dodd on CNBC announced that part of the Obama stimulus plan may relax the mark to market rules.... all banks will probably shoot up on this little tidbit whether its true or not.
 
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imirza

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I also think they are going to 0, but short term rally might happen. Didn't you also expect things to be good till March?

I do expect a rally till April May. I am not heavily short the banks. But I refuse to cover my shorts. My thinking is I will short more at higher prices. I hedged by buying FAS today. I figure we may get a bounce. I eventually want to have 50% of my portfolio short bank stocks when the next leg down starts. As well as a long FAZ position.

randallg99 - If the suspend mark to market accounting is true we should get a big market bounce. This rumor started last Thursday which caused the market to jump 5% that day and Friday. I figure it may be good for a 15-25% bounce in bank stocks. Hence I have a long FAS position to take advantage. Ultimately though banks are heading to zero. The government and our business leaders are too incompetent to fix the problems. Either that or they don't really care about fixing them.
 

kidgas

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Couldn't resist buying more FAS today. Picked up Jul 5 puts at 5, FAS at 7.77, and sold Apr 7.5 calls at 2.55. That gives a rough basis on this group of shares at 6.72 plus some commission expense. The overall basis for all the shares is now 10.10, but I will still consider the basis as 10.93 for the purpose of selling additional calls. I plan on selling the March 10 calls on any major spike near 9.50 or 10. Currently, I have a GTC order at 1.10 for the Feb 10 calls in case something happens that soon.
 

kidgas

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I want to apologize for not keeping up very well with FAS updates. I have done better on my stock collar thread but am busy so can't post everywhere all the time.

To catch up to where I am currently: Going into March I sort of screwed up and bought back some calls early in expiration week only to watch FAS reverse and decline substantially. That wasted some of my money and hurt somewhat costing me about a months time. Today, here are my positions:

FAS long 3000 shares
FAS July 5 puts long 20 contracts
FAS July 7.5 puts long 10 contracts (so all 3000 shares protected to downside at these levels)

FAS April 5 calls short 10 contracts
FAS April 6 calls short 5 contracts
FAS April 7.5 calls short 15 contracts

My overall basis for all these positions is 9.56. I will have to see what it looks like might happen this week. I think it is safe to think that I will have to buy back the April 5 and 6 calls to keep them from being exercised. However, with the financial stock volatility, the April 7.5 calls could end up either ITM or OTM. Other banks report this week so the volatility will continue. I will update this thread when I make changes and why.

I would like to point out that I discovered something shortly after I purchased FAS. The opposite position of FAS is FAZ (3x long and short, respectively). So, theoretically FAS and FAZ should be mirror images of each other. If that is the case, their added value should be relatively unchanged. But you will notice that the summation of their values is not constant but has declined substantially over the last several months since the ETF was formed. That means that having a short bias on both of these ETF's is actually the only way to play a long position if you aren't choosing to day trade. That has made me hesitant to roll up any equity gains in FAS since by July, financials may have gone up significantly while FAS is unchanged. It will make for an interesting few months. I will unlikely trade leveraged ETF's again unless I try to capitalize on a short bias for example buying ATM puts and selling ITM calls monthly. That may be a guaranteed winner???
 
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Exact

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I personally own BAC, LYG, and C -- I bought them for my retirement account in February when they were near lows. Since then, they have bounced significantly, however, I am holding them long term as I think they have further upside long-term potential. There could be some more dips coming in the short term and I would use this as an opportunity to scoop up more shares. For example, I'd love to get my hands on some more BAC @ $3-5 per share or C below $2.50, but don't know if we'll ever see those price points again. I do not trust myself with short-term market timing. Last year, I hit a home run by shorting REITS with put options, but subsequently lost all of my profits and then some by investing in Canroys. I like the idea of shorting SRS ... wish I had thought of doing that as it seemed the obvious move when it was above $200. Those Ulta Short funds almost always tank after they jump way up.
 

Russ H

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Wow, Exact-- you're the first person I've heard about who is investing for the long term in this market.

Lots of money to be made (and lost) in short term plays. But long term? It will be an interesting ride.

-Russ H.
 

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