Tyler Durden says BAC to take a hit

In a move that could either send BAC stock limit down overnight or send it soaring (we are still trying to figure out just what is going on here), the NYT has broken major news that the US is preparing to go nuclear on more than a dozen big banks among which Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, in an attempt for Fannie and Freddie to recoup $30 billion if not much more. The lawsuit is expected to hit the docket in the next few days: "The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims."

http://www.zerohedge.com/news/massi...-against-americas-biggest-banks-soon-tomorrow

 

I wasn't aware that US stocks could go limit down (i don't trade them). I know there are circuit breakers or whatever they are called now to the indices.

 

In a move that could either send BAC stock limit down overnight or send it soaring (we are still trying to figure out just what is going on here),

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I should look up Ben Grahams caveats on litigation, if I recall, not good. I still can't figure out where Buffett and Trump fit into the equation on buying this stock.

 

they can't.
there is an uptick rule invoked for 2days if a stock drops 10%+

 

The uptick rule would only apply to shorting, not if you want to sell an existing long position, correct?

 

Correct. You can sell whenever you want. Uptick rule doesn't stop shorting. Just makes it frustrating.

 

Too late to buy put options?

 

correct.

 

I personally don't miss the uptick rule. I remember back in the mid 90's that we would have one of our traders go into the stock we wanted to short and create an uptick (usually only took 100 shares if the volume was fairly low) and then we would hit the bid for 5000 shares.

However, I do think removing the uptick rule has been negative overall for the markets. As a trader I like no uptick rule. However, as an American I think we should probably put it back in.

 

I haven't run all the numbers but I imagine the Implied Volatility is through the roof and unless you get a major collapse, then buying a put here is too late.

If you think BOA is going to collapse, a put on the XLF or SPX is probably a safer play. Or heck, go long the FAZ if you think a BOA collapse is coming.