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New Plays

Playing the FASB News

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NEW DIRECTIONAL PUT PLAYS

Regional Bank Holders - RKH - close: 52.75 change: +0.84 stop: 56.25

Why We Like It:
FASB voted unanimously to approve changes to mark-to-market accounting rules. So why did the financial stocks spike at the open and fade lower? It's because the news is already baked in. Tomorrow's jobs report is going to be terrible and it will be a great excuse to take profits.

The FASB rules should help banks with their Q1 earnings reports but the problem with the toxic assets remain and the Time Geitner plan to buy these assets from the banks to get them off their books may be dead.

The rally in banks failed to breach the March highs. I think this is a clue that the rally has run out of steam. I am suggesting new put positions in the RKH right here. However, this is an aggressive play. We're in a volatile sector and we don't know how markets will react to the jobs data tomorrow. If the RKH gaps open higher above $56.00 we do NOT want open bearish positions.

Buy puts now. My first target is $47.50. Our second target is $42.50.

Suggested Options:
Very aggressive traders might want to buy the April puts but these expire in two week. I'm suggesting the May puts.

BUY PUT MAY 55.00 RKH-QY open interest=  56 current ask $8.10
BUY PUT MAY 50.00 RKV-QJ open interest=1168 current ask $5.60
BUY PUT MAY 45.00 RKV-QI open interest= 334 current ask $3.60

Annotated Chart:
RKH regional bank holders

Picked on    April 02 at $ 52.75 
Change since picked:      + 0.00
Earnings Date           00/00/00 
Average Daily Volume =       6.0 million  
Listed on April 02, 2009         


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