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Strategies & Market Trends : Gersh's Option trades -- Ignore unavailable to you. Want to Upgrade?

To: Mark Johnson who wrote (619)	8/18/2007 1:49:07 PM
From: Mark Johnson	Read Replies (1) \| Respond to of 652

Wow, mortgage lenders are all over the map. What appears to be a good short are the TMA (Thornburg Mortgage) Sept 25 and 30 calls for 20 cents and 10 cents respectively. TMA may be a buyout candidate but the fundamentals have changed in the mortgage industry and that is why I like the idea of shorting the 25 and 30 calls, I think there is limited upside. If the shares of TMA go up to 21 or 22, it could be wise to cover the short. I don't see the shares of TMA going up past 20 in the short term. Also, shorting the CFC (Countrywide) calls, I prefer anything above the 32.5 calls at this point in time. Mortgage volume, I think will continue to go down, during the short term. Easy mortgages have gone the way of the DoDo for them. It is harder to get a mortgage now than it was a month ago. CFC will ride out the storm but I think but there are too many unknowns for them, putting a cap on the stocks upside. Bid Ask Vol OI 30.00 CFCIF.X 0.40 0.40 0.40 0.50 1,782 21,831 32.50 CFCIZ.X 0.30 0.10 0.20 0.30 813 4,375 35.00 CFCIG.X 0.10 0.20 0.05 0.15 924 5,475 On the flip side, I don't think they will go out of business. I don't like to short puts but shorting the Sept 5 puts at 20 cents seems reasonable. I would not go overboard on doing so. Covering the short if CFC hits 10 to 12 a share might be wise. Good shorting all.