Monday, February 12, 2007

The NFI Puts

I can afford to sit back and be a bit skeptical about today's NFI put activity since I've racked up huge gains from entering last WEDNESDAY when the stock was having that one day rally. Volume on the March 15 puts is over 3,700 contracts today after only being just above 2,000 this past Thursday and Friday. Here I'm thinking of dumping the rest of my positions in the March puts and folks are buying up the Mar 15s. Is this the Barron's effect where the negative write-up on NEW over the weekend has sparked the crowd jump en masse today? Remember, March 15 puts are trading at about $2.30 and the stock is still at about $15.30 - those are extremely expensive options.

Breaking and closing below $15 may be tough without real news:

We're really at the point where we need news. Return on captial (ROC) in the lower chart is at the worst levels in nearly 3 years - all accomplished on bleak industry fundamentals and speculation about probabilities over just how bad it is for NFI vs its competitors like NEW and HSBC. But buying the 15 puts today at these prices? Makes no sense until we know more.

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