Well, instead of buying the stock this morning I decided to do some options. I bought a boatload of calls expiring jan 2012 with a stike price of 4 with a .96 premium. Figure I should do better from here than owning the stock.
I have a riskier trade on. I have a Jan 2012 call spread on. I bought the Jan 2012 5.00 calls and sold the Jan 2012 10.00 Calls. My average cost per option is .53. I also like this trade, selling the Jan 2012 2.50 put and buying the Jan 2012 Call. It is obvious that the worst for Citi is over. I believe once the government is out this stock will be over 5.00 and stay there. Good luck to everyone who is long Citi.
I own the common, have thought about selling Jan '11 $5 calls and Jan'11 $2.50 puts. At today's price, that's 30 cents a share or an annualized return of about 15% if the stock remains range-bound by government sales. My basis is about $4, so I'm not concerned about it being called away, and I don't see much chance it will close below the put price.
Waggie is correct about buying the 2.50 vs $4. strike.. But here is my thinking.. The gvmt has said all along that they wanted all that stk sold by Sept 2010...It is my belief the institutional investors, control everything...They can drive these stk up and down at will.. They bought 7B shrs back in Jan at $3.15 a shr... They will probably be the ones who end up buying most of that 7.7B shrs...So, untill they get all that stk bought...They will keep this stk from getting much higher...But the Jan 2011, $2.50 calls are selling at about $1.50... Anyway, those are the ones I like...We could see a big move between now and then...I wouldn't own any C at this point. If the gvmt hadn't said they weren't selling any more stk, till after earnings... Makes me believe C could report some eye popping numbers... But, will the inst investors let it go up, before they have all that gvmt stk bought??? Keep some powder dry, in case they decide to drive it down to $3.50... I think the gvmt wants to get at least $4. a shr...But will they???
That puts your breakeven at $4.96. Why not buy the Jan 2012 $2.50 strike for $1.83 and have a breakeven of $4.33. I believe your chances would be better although you wouldn't be able to buy as many contracts if you are on a limited budget.