Wednesday, December 05, 2007

Strategies on Banking sector

MAS said profitability of local banks will be affected by subprime issues. My opinion is, if market is to go anywhere, banks should show the way? If they are resilient and head upwards, i think it will be safe to tikam on the upside slowly at first to reduce risk and add on when proven right. Otherwise if they fail at support turns resistance, put warrants will be handy. Here are few strategies on warrants i have devised.

1. Buy very OTM PW with at least 60 days to expiry - will lose little if stock trades upwards. The trick is, when a stock is moving down, it will be faster than going up.
2. Buy slightly OTM PW with at least 60 days to expiry - will lose time value if underlying trades sideway.
3. Buy OTM PW with less than 30 days to expiry - will lose premium if underlying goes up

Notice I focus on the risk first instead of thinking abt the rewards? Alexander Elder said, "If you take care of your losses, your profits will take care of themselves"

I uploaded a cartoon made for my wedding night for your viewing pleasure incase you are bored with the intra day market.. keke

DISCLAIMER: This is not an inducement to buy or sell. You should do your own analysis on top of my postings.