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ETFC - E*Trade Financial *** Covered Call ***

E*Trade was crushed by news that they had a huge exposure to subprime loans and were taking a monster write-down. We all know E*Trade is not going out of business and will more than likely be eventually acquired by another broker. This is a smaller trade than I would normally profile but a reader brought it to my attention. Odds are very good this will end in better than a 86% profit and the cost of entry is minimal.

Buy ETFC currently $4.13
Sell Jan-2009 $5 LEAP Call OYN-AA currently $1.45

Profit if called: Premium 1.45 + appreciation .87 = $2.32
Cost of entry: $4.13 - 1.45 or $2.68
Profit = $2.32 / $2.68 or 86%


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New Watch List Plays Triggered
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RIG $135.07 - Transocean Inc

Transocean was declining so nicely into Wednesday's close I thought sure we would get the second half of our ideal entry at $120. Unfortunately it was not to be and the +$7 gain on Thursday squashed that idea. I am going to leave it as an open order but we should probably not expect it to happen.

Company Info:

Transocean Inc. (Transocean) is an international provider of offshore contract drilling services for oil and gas wells. As of February 2, 2007, the Company owned/had partial ownership interests in, or operated 89 mobile offshore and barge drilling units. Its fleet included 32 high-specification semisubmersibles and drillships (high-specification floaters), 20 other floaters, 25 jackups and four other rigs as of February 2, 2007. As of February 2, 2007, Transocean also had three high-specification floaters under construction. The Company s primary business is to contract these drilling rigs, related equipment and work crews primarily on a dayrate basis to drill oil and gas wells. Transocean also provides additional services, including integrated services.

Transocean completed its merger with Global SanteFe (GSF) in late November and nearly doubled the size of the company and made it an even larger force to deal with when it comes to rig availability and pricing.

Initial breakdown trigger: Hit 12/4 @ $130

Position: 2009 $140 LEAP Call VOI-AH @ $15.80

Secondary trigger: $120

Buy 2009 $140 LEAP Call VOI-AH to average down


 

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