Chicago Mercatile Exchange (NYSE: CME) shares are soaring higher today after the company reported a second-quarter profit of $201 million, or $3.67 per share. Excluding one-time costs, CME earned $3.93 per share, beating analysts' estimates of $3.85 per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CME.After hitting a one-year high of $714.48 in December, the stock hit a one-year low of $282.00 last week. CME opened this morning at $328.99. So far today the stock has hit a low of $326.67 and a high of $349.80. As of 12:50, CME is trading at $344.28, up $18.75 (5.8%). The chart for CME looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $280 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just four weeks as long as CME is above $280 at August expiration. CME would have to fall by more than 18% before we would start to lose money. Learn more about this type of trade here.
CME hasn't been below $280 at all in the past year and has shown support around $290 recently. This trade could be risky if the economy keeps getting worse over the next month, but even if that happens, this position could be protected by the support the stock might find at its year low of $282.00.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CME.
Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
Reader Comments (Page 1 of 1)
9-07-2008 @ 5:20AM
BILL KEAR said...
BUY CME GOVERNMENR PROTECTED MONOPOLY
NYMEX /CFTC
I LOST 2K TO THIS SCAM.
Nymex opened for trading at 2:30 pm Sunday (after having anounced that they would be closed for holiday)
Brokers were closed and small traders (net longs-see cftc commitment of traders report) were caught
unaware of their accounts being looted by local large traders heavily shorting. They ran the stops in
the illiquid markets if the longs were lucky enough to have a stop.
Nymex never announced when they were going to close and were not answering their phones. Brokers
were not in to take orders and those with electronic trading cannot even get solid confirmation of
their trades. As of now millions of dollars have been lost by the longs who cannot establish their account balances. Nymex has still not issued a closing price(9/2/08-- 2am).
I personally lost half my account to these guys in a few hours. (I still can't figure the real balance
because my broker was closed and I dont know if Im out of the position or not)
This was no accident (I was a broker and have traded for twenty years). This needs to
be nipped in the bud.
This is not a market but a scam and Durkin/ Newsome are to tight with the CFTC and NFA.
Nymex locals are notorious crooks washing trades and post assigning account numbers. I can live
with few shaved points but this is outright blatant in your face shakem out theft. (see CFTC ENFORCEMENT ACTIONS)
Bill Kear
----------------------------------
extenNYMEX.com: Biography - James Newsome sive detail on transactions NYMEX pays $8m settlement over WaTwo Nymex executives could share $45m via CME acquisition gner patent. | Financial News | Find Articles Ex-NYMEX director pleads guilty to fraud | Reuters Judge Finds Mayer Commited Fraud; Levies Fines FERC Presents Natural Gas Market Manipulation Claims Against Amaranth - Knowle CFTC Sanctions Two NYMEX Brokers for Fraudulent Trade Practice Schemes in Join NYMEX Energy on CME GLOBEX
Newsome sits on the board of the NFA/ CFTC/ NYMEX and the CME Who do you go to
with a complaint? conflict of interest?
EMAIL AFORTINI@AOL.COM
9-21-2008 @ 11:20AM
Ryan said...
The CME has committed outright fraud by establishing cash settlement prices for U.S. equity index futures and options for September expiration at fictitious prices way above the range of friday's trading range. The CME rulebook states that settlement prices will be a "special quotation based on opening prices of the underlying index"
well i challenge anyone to come up with a special quotiation that is 3-5% higher than the opening prices from friday's opening prints.
These prices cost me hundreds of thousands of dollars because i was not able to hedge my OTM calls at those strike prices which the cash market never even came close to.
I hope the CME has a good lawyer, because i will never stop coming after them.
Good luck to anyone using them as a counterparty in the future.