Option Investor

Trade Alert - LEH

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A Big Day for Brokers!

Shares of Lehman Bothers (NYSE:LEH) are trading higher, up nearly 2% in conjunction with the strong rally in the financial sector. The upside activity has tested our stop-loss order (which triggers when the bid price for the stock is above $95.50) and will likely be executed by the end of the session. Traders who believe the rally will fail near the current resistance level should raise their stop-loss price to accommodate today's bullish momentum. Another alternative is to roll up and out to a new bearish spread with higher strike prices, while maintaining a credit in the overall position. The OCT-$110/OCT-$105 may be a viable candidate in this regard. Finally, a trader with a neutral to bullish outlook might consider purchasing the OCT-$95 calls to create a horizontal (calendar/time) spread, where the near-term options can be sold to reduce the basis of the long position. We'll post additional comments on the LEH spread after the closing bell.

MCM Staff

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