My take on playing the "financials"
BTW, today was absolutely scrumptious.
Here are my thoughts:
1. Don't short XLF, buy the ultrashort SKF which is 2x negative of XLF.
2. I'm looking at the investment banks. They led the markets up to the current level, and IMO will lead it down. Take your pick - JPM, MER, LEH, BSC, or GS. They all have significant exposure to subprime, directly or indirectly. Who knows what will happen to all the CDO's?
During the "flight to quality" which will gradually take down the junk bond market, the big name financials will be in the spotlight. Also, the M&A activity will come to a standstill as liquidity dries up - and the major investment banks will suffer.
3. If you're looking at trading options, I've been happy with GS. The puts are "expensive" with regard to the IV and time premium, probably not for buy and holding. But for ITM options, a $5 move on a 220 dollar stock is more likely to occur in a short period of time than it is for a 70 dollar stock.
Well, that's my 2 cents, FWIW.
I'm interested in everyone's else's ideas. |
