short naked puts at 5 on subprimes (NFI NEW)

Discussion in 'Options' started by scriabinop23, Mar 6, 2007.

  1. Any thoughts guys?

    Premium is great.... Looking at May/Jun 5 strikes for both... Risk/reward doesn't look too bad considering the IVs.

    Any thoughts here on internals and downside possibilities on these from people who know the balance sheets and risk profiles from hereon out?
  2. Did you try the same thing with Refco options? The IV was high. Why was the IV high?

    You tell me...
  3. no. whats refco's symbol?
  4. When a stock drops like NEW did and they list the 2.50 strike, I would guess almost every time the stock eventually trades below the strike and many times goes below 1.00..I think Enron was the first stock the 2.50's were listed seems when a stock is facing a decent probability of bankruptcy, then traditional option models aren't so good anymore..It is now kind of a binary event..BK or not..stock goes to zero or X.
  5. I had the exact same thought. In my IRA account a few days ago I tried to do this synthetically with a covered call write with the April $5. I put it in as a combo order and didn't get a fill. I refused to budge on my price and moved on without looking at it any further.

    I did look closely at the Balance Sheet and felt comfortable with the company's ability to continue. However, in one of the inevitable stockholder law suits that follow this type of situation, here was mention that the Trustees were going to recommend that the shareholders revoke the REIT election. This spooked me a little bit, but not enough to sway me from trying to make the trade.

    It's interesting that others had similar thoughts.

  6. On NEW, check out that 51% dividend.

    Yeah, that's safe for sure.
  7. Smiling, that's how I was thinking a few years ago on ANLY before I took my lumps, when I bought in at about $19.

  8. MTE


    You mean you don't know what happened to Refco!?:confused:

    Search the news before jumping in on this one.
  9. #10     Mar 7, 2007