FAZ – Financial Bear 3X Shares (Last:5.42)

We could stretch for extra bases, since FAZ looks eager to probe a gap above yesterday’s high, but instead let’s play it conservatively, offering four June 10 calls short for  0.30 against the four October 10 calls we already hold for 1.20.  Check back 30 minutes after the opening bell, since we may need to adjust on-the-fly. _______ UPDATE (10:25 a.m.): Live and learn, as they say.  This vehicle is a chat room favorite, but I hadn’t paid much attention to it myself until we established a small position the other day. And now I know:  FAZ is an unwinnable carny game controlled by some of the sleaziest operators in the business.  We know this because of the way the June 10 calls that we tried to short this morning behaved when financial stocks opened on a phony gap-down. Ordinarily, option market-makers would have used this situation to rape buyers of June 10 calls on the opening by filling buy-at-the-market orders at the highest price possible. Instead, there evidently being no market orders or even any enthusiastic bids, the weasels fell over each other lowballing the offer, selling the calls in front of us at a price we could not match.  The result is that the calls opened at 0.22 — not only far less than the 0.30 we had sought, but at a between-markets price that was out-of-bounds for retail customers.  (The public can trade only in nickel increments except on spread orders.)   Considering the foregoing, my recommendation is to scratch the October 10 calls on the current 1.20 bid. Note:  I offered them for 1.25 myself, going between the 1.20/1.30 market reflected at the time, and was filled within five minutes.

Tagged as: FAZ, Financial Bear 3X Shares