Dead cat bounce or not, the short covering forced by the SEC certainly is an opportunity for the very agressive trader. Now FNM is 96% above what it was before the SEC ruling. If the fundamentals are still intact, then FNM should still be a good short.
To play this as a conservative trader that I am, selling a call spread works for me.
FMN and many of the other financials that bounced last week should make for great sell call spreads.
Until the next play the feds give us....
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Hi Dell,
How far out would you go with the call spread?
Could bring some light over what is going on in the financial sector?
FRE and FNM are posting losses, and they also want to sell 15 bil. worth of stock. The investors are jumping on that stock like there is no tomorrow.
Same thing happened to MER and WB. Posted huge loss, both want to sell a large amount worth of stock, and also manage to get their stock of the floor with great success.
Meanwhile you have Google and Microsoft and others showing profits (and no loss on their balance sheets), yet their stocks are down by a great margin.
Who's the idiot here? Me, because I'm nat trading with the flow, or what?
With this rally it could be a few weeks. So two months should not put you in bad shape.
What most are not realizing with the raising of capital, the current shareholders are going to be very diluted. For those that do not understand, If there are 1 mil. shares and I own 100,000 shares, I control 10% of the value of the stocks. If they sell 1 mil. more, I now have 5% of the value. that is dilution. Now if the Gov. natioanlizes FNM, there will be no shareholders so either way current shareholders stand to lose a bunch. Why the rally? The same reason Yahoo sold for 290 or so 9 years ago. The sheep get set up for the fleecing.
Same thing with WM and WB. It's just crazy. I was told that the market is always right. It sure doesn't seem to me it is.
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