Ouch!  Rumors are flying today that Countrywide Financial is going to file for bankruptcy!  The stock has just be slaughtered today - CFC(0.00 +0.00).

Well, I’m quite happy now that I didn’t actually sell those puts.  It would be an ugly margin day in the account as we would be covering all of the intrinsic value of the options, along with about 20% of the stock price! Not to fun at all.

So I guess that play didn’t quite work out.  If this was my real money on the line, I would have to do some serious research right here.  If CFC actually does file for bankruptcy this week, I don’t know that would do to the stock.  It is possible that the bankruptcy filing has been priced in and it wouldn’t do much.  If that is the case, holding through expiration might be a valid play.  The problem of course is the risk that you will lose more, on a percentage basis - a lot more.  If they don’t file this week, I’d guess that the stock pops back up to above $7.50.

I don’t have any analysis to back up my thoughts here, this is all off the cuff, reading the news and making a play type of work.  I haven’t done any major charting work, fundamental or technical analysis of this stock.  Personally, I still like the idea of the synthetic covered call - this just looks like it is going to turn out to be a bad month to try it on CFC.

Anyhow, good luck- and always trade smart!

Categories: Investing