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« IAMGOLD Corporation An Opportunity Beckons | Main | Randgold Resources Limited An Entry Point Approaches »
Tuesday
Aug112009

U.S. Bancorp PUT Options Up 45% in One Day

USB Chart 12 August 2009.JPG

Chart courtesy of Stockcharts

We are pleased to report that the PUT Options we purchased on U.S. Bancorp (USB) yesterday for $1.00 per contract, closed today at $1.45 for a gain of 45%. We bought the September 2009 series with a strike price of $22.50 for $1.00 per contract (UEEUX).

U.S. Bancorp fell yesterday $0.92 or 4% to close at $22.10, however we were surprised to see this parlay into a 45% rise in the value of the PUT Contracts. We would normally expect to see a move of a much smaller ratio than 10:1 which just shows have volatile options trading can be.


The broader markets in general look overbought to us and the financial sector appears to offer the best opportunities to short this market. If you are not too keen to short USB you could take a look at Bank Of America which we see as being in a similarly precarious situation.

A quick look at the above chart and we can see what we hope is a good correction for USB and also that the technical indicators have peaked for now which bodes well for further falls.

In terms of an exit strategy we usually target a trade which we think has some certainty of generating a return of 100%, but we have yet to place a sell order, we will observe for a little while before making a move.

US Bancorp has a market capitalization of $42.26 billion with 1.91 billion shares outstanding, a P/E ratio of 26.87 and closed down $0.92 today at $22.10. US Bancorp trades on the NYSE under the symbol of USB.

Your thoughts are of course most welcome.

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Reader Comments (2)

I never got an email from you saying you were buying these puts, only that you would let us know.
Jim

August 12, 2009 | Unregistered Commenterjames purcell

Jim,

On the 10th of August we did post that we thought overbought banks were worth a punt, at that time we were not exactly sure which options would offer us the best value. Once we had made a decision we posted again, the same goes for BAC which we are still trying to buy. If you missed one of our emails then we are sorry about that and don't know why that should happen.

August 12, 2009 | Unregistered CommenterGold Prices

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