Bullish

Skeptical

  • Wyeth.  This drug manufacturer saw volume fly through the roof as everyone started telling the story of Pfizer wanting to pick the company up at a little over $50 a share.  Already the price has made a substantial move to the upside, and the deal currently is not concrete.  Front month options went crazy, and normally on this type of news we'd try to get some 2010 LEAPS at around $40 - $45, but our calculators all show uphill battles with too much risk.  Volatility is very high, so buying options right now is a bit crazy, and selling put contracts in this market environment may be an open invitation to pain.  If you eat risk for breakfast, going short a straddle at $45 strike expiring in Jan 2010 will net you $10.90 per share, and you'll be profitable if the price stays between $34.10 and $55.90.

Bearish

The financials, and related companies.  State Street got murdered last week, Capital One and American Express are starting to feel pain as consumers stop spending.  Most of our financial plays have netted copious amounts of money for us already this year.  Looking forward, one can argue that the bad stuff is already priced in, and that traders are actually overshooting to the downside.  We believe, however, that there is still a good scandal or two left out there.

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