ETFC (etrade) Analysis: Risk/nagatives: - real risk of bankruptcy - complex balance sheet making it difficult to find true writedown numbers linked to mortgage melt - technical is par at best, with ma10 still below ema20,30 just levelling off slightly and cmf > -0.2 but looks like it found support at ~$3.5 and volume is dieing down from the current downtrend. Good: - Current price already baked in many nagative factors and then some. - Citadel 2.5 billion infusion, the good part is citadel isnt really protected against etrade bankruptcy either, so they are taking a big risk and truely believe in etrade to turn around. - Panic account closings are under control and died down. - Etrade still holds ~4+ million accounts which contains a lot of moms/pops accounts, bailout will most likely occur before bankruptcy. - As long as Jan earning report isnt complete devastation, this stock should bounce back to $5. In the long run (mid/end of 2008) i strongly believe etrade will come back. The triple play (using 10 contracts) 1) July 5/3 put spread: the July timeframe actually give us an advantage in this case as it will take etrade some time to bounce back. Sell -10 ETFC JUL 2008 5 Put (.EUSSA) Buy 10 ETFC JUL 2008 3 Put (.EUSSG) Max Gain: $1200 Max Risk: -$700 (stock drops to $0) 2) Using the $1200 net to buy 300 underlying shares. Max Risk: -$1200 At this point, you are have 10 contract of 5/3 put spread, and 300 shares of underlying with a max risk of $1900. 3) Start selling month over month covered calls on the underlying to reduce your cost basis (but i would wait until after jan earning to start) I like this play because of its limited downside risk and huge upside potential. What do you guys think?