I do not know about anyone out there in the real world, but I will not sleep a wink until Geithner unveils his plan. By golly jees wiz guys a man that cant get turbo tax right is going to show little ol me just how this game of economics is played.
Is their any capitalists left? Are we a dying breed? Is the road to ruins paved in socialism our only way? Alright already I did mislead the post with GE.
Okay now Ge is imploding. 10.88 or so as I write. If it goes below 10 it will be a candidate to be excluded from the all boys club of the Dow industrial. So who cares they were taken off once before.
My point here is that GE is probably an okay run company other than a few over leveraged entities. They should weather the storm okay. Selling Mar. 7.50 puts for .37 is not all that bad considering that you will have to have about 4.00 for every option so that is not quite 10%. For those more aggressive, the 5-7.5 spread will cost 2.50 and is right at 10% and for those that have not listened to option trading and want to lock in a 10% dividend and sell the calls more power to you. The point is, this may be a good one.
6 comments:
I thought there were about 3 other components on the DJIA that are under $10, and obviously not getting kicked out.
In your article (e-mailed) the author conveyed the idea that it is a good thing to have those bankrupt banks still part of the DJIA because it will slow down its fall. They cannot fall that much (those under $10) and if they do the impact is very low since it is a weighted index.
If GE will be kicked out, another one will replace it and DJ will go up as a result.
The bigger problem is that there no companies left out there with a capitalization big enough to satisfy DJ's criteria. Then again, those remaining part of the index are better off anyway.
What will likely happen is the capitalization requirements will be "temporarily suspended" just as the 3 banks that should be kicked out are now on hold. Then possibly have lower reqirements.
I do not know of a better way to make the idustrials continually go up. So dont bet against it in the long tem it will be "fixed" so as to allways be bullish.
As a trader it sure beats trying to find the next great stock. Just buy the index and sell calls 10% out and collect the premiums or do as I like and play the calendar diagonal game on the index. Not now, but when the bottom is in, here we go.
I'm bullish on the index itself, not the economy or the stocks. Just the index, for many reasons, one of them being mentioned by you.
DJIA represents a false sense of prosperity in the equity market, but it does a very good job.
So, long DJ, short everything else.
I could not agree more. In fact it was great seeing the DIA begin to trade.
However....In times like this, it is more prudent to step aside for a bit and then get back in.
There are many companies with fresh new lows nowadays then back in November 21, when Dow reached a low level.
DJ now is above that low, but the stocks are lower.
Till something else changes, my theory still stands.
It sounds nuts, but it's true. Long DJ, short stocks.
fundamentally we should be at 6000, but technically I am looking higher still.
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