Countrywide Financial Corp. (NYSE: CFC) -- implied volatility decreases after Federal Reserve rate cut. CFC, a U.S. home mortgage lender, closed at $19.88. Bank of America says, "We're sticking with our Buy on CFC given several competitive advantages which should help over the long-term." CFC September straddle is priced at $1.25. CFC October option implied volatility of 65 is near its 26-week average of 64 according to Track Data, suggesting non-directional risks.

Genworth Financial Inc. (NYSE: GNW) -- elevated volatility decreases after rate cut. GNW is a financial security company meeting the retirement, longevity and lifestyle protection, investment and mortgage insurance needs of 15 million customers. GNW closed at $30.45. GNW over all option implied volatility of 31 is above its 26-week average of 28 according to Track Data, suggesting larger risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Option update: Countrywide volatility down as liquidity improves originally appeared on BloggingStocks on Wed, 19 Sep 2007 11:14:00 EST. Please see our terms for use of feeds.

Reuters reported that Countrywide Financial Corp. (NYSE: CFC), the nation's largest mortgage lender, received $12 billion in secured financing -- prompting the stock to rise 8%.

This reminds me of an old banking adage. If you owe a bank $100,000 and you can't repay the money, it's your problem. But if you owe the bank $50 billion and can't come up with the money, it's the bank's problem. In this case, the bank is the U.S. economy and Treasury Secretary Hank Paulson seems to have concluded that the U.S. cannot afford the problem of its biggest mortgage lender failing.

Is there less here than meets the eye? Countrywide stated that the $12 billion comes from new or existing credit lines. A credit line is the the option to borrow -- but it's not clear who the lenders are or the terms under which those credit lines can be drawn down. These questions matter because whoever is doing the lending had better have a clear idea of how they'll get paid back if Countrywide gets into further trouble.

Continue reading Is Countrywide (CFC) too big to fail?

Is Countrywide (CFC) too big to fail? originally appeared on BloggingStocks on Thu, 13 Sep 2007 13:56:00 EST. Please see our terms for use of feeds.