Food prices are up, and that certainly includes what people are paying for Texas tea. We can't even begin to imagine what Jed Clampett's estate must be worth these days. While black gold is rising, many other things are falling. Just today, we found ourselves thinking, "Golly gee, GE. You're sure looking like a buy to me." We can't say how GE's struggles will play out, but we can see that buying some January 2010 30-strike call options might offer the patient investor a reward. GE was about 2.75 standard deviations below its 50-month moving average this week; we're looking at a chart that goes back twenty years and we see no such event having previously occurred. GE is over sold in a big way. Yes, it could go even deeper into buying territory, so let's talk about ways to play this puppy. The appeal here is in a very small position using the aforementioned calls. Better yet, the bull call vertical using the long 2010 30-strike calls and the short 35-strike calls of the same expiration. Should GE fall further in the coming months, the position could be increased by either a) adding more verticals or b) covering the short 35-strike calls for a profit and leaving the long 30-strike calls to (hopefully) run. A person would be betting that GE rebounds between now and January of 2010 based on technical indications of a significantly over sold condition. This could be a fairly long-term position as the idea is based on a monthly chart. Like any single-stock idea, this one is speculative. The trader is shooting at some food in hopes that up from the ground come some bubblin' crude. To be sure, the trader would not want to waste his ammo, which is why he'd keep the position super small and be ready to chalk it all up to an entertainment expense. Ya'll come back now, ya hear!
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Betting on a GE Bounce
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