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Fannie Mae - FNM - close: 35.18 change: -1.07 stop: 28.45

Company Description:
Fannie Mae is a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. (source: company press release or website)

Why We Like It:
We have had our eye on FNM since it broke out over its 10-dma three days ago. Now after today's news it might be time to consider a position. After the closing bell FNM announced it was cutting its dividend from 50 cents to 35 cents. FNM is also selling another $7 billion in special stock to raise capital. While the news is negative we suspect it will mark a bottom in the share price. We are suggesting that readers buy calls on a dip into the $32.25-30.00 range. We might be hoping for too much of a correction. After hours FNM was only trading down near $34.40. More aggressive traders might want to consider jumping in near $33.00. If we are triggered in the $32.25-30.00 zone then our target is the $39.00-40.00 range. FYI: We do have a wide stop loss and more conservative traders may want to use a stop closer to $30.00.

Suggested Options:
We are suggesting the January calls. Our suggested trigger is at $32.25.

BUY CALL JAN 30.00 FNM-AF open interest= 6809 current ask $7.10
BUY CALL JAN 35.00 FNM-AG open interest=10053 current ask $3.80
BUY CALL JAN 40.00 FNM-AH open interest= 3877 current ask $1.80

Picked on December xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/08/08 (unconfirmed)
Average Daily Volume = 14.6 million
 

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