citigroup leaps
I'm looking at (C) and it costs 72$ to buy a contract struck at 5$ for 2 years. Can anyone convince me not to do this?
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i think april 16 earnings numbers will be very interesting..
I agree
I might buy a few calls as well
can you explain this? what are you buying?
I figure he's looking to buy call options on Citigroup shares expiring in January 2012 with a strike price of $5.00.
They are trading at around $0.72/option, which is a total premium of $72 for the right to buy 100 Citigroup shares at $5 on or before January 21st, 2012
$5 calls that expire january '12. are you here 2 learn or something?
i guess my question is actually can anyone convince me not to do this 30 times
LEAPS: Long-Term Equity Anticipation Securities
It is basically an options contract for an expiration date a year or more away.
That's kind of expensive. The stock is really cheap why not just buy the stock outright instead of paying a premium. It's 16% of the current price.
one word: "leverage"
pandit's bitch ass better deliver. already lost money on CIT.
To play devil's advocate:
The current street high estimate (although I'm not one to defend the accuracy of a sell side analyst) is $5.50/share.
BAC (use it as a comparable) is currently trading at 9x '11 annual estimates, you strap a 9x '11 on C and you get $3.35 (street mean estimate for '09 earnings on both BAC and C). Considering your break even sits @ $5.72 I'm a fan of the length of time of the contract and it seems attractive but with current expectations of '11 earnings are going to have to be revised upwards for this company to make a serious move (+50% from current price).
Additionally, are earnings not being reported on the 19th of April?
Is there a particular reason you like Jan 12 over Jan 11? Also are you planning this as a pure directional punt or also a vol play?
Revsly, he may very well be doing both. Jan '12 offers him greater Vega exposure., but really, I think he's of the mindset that in almost 2 years, Citi's share price will advance substantially and he'll just cash out when its well above the strike.
In any event, Vol is already expensive on these guys. If he thinks there's more vol to be had, there's a cleaner way to play this. Call up MS eq. derivatives desk, I'm sure they'd be happy to sell you a variance swap on Citi. ;)
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