SOLD -1 SAP 100 NOV 08 37.5 PUT @3.40

Sap AG

Wrote a put on SAP. Fee $7.50. The market looks poised to move up. S&P at 895 risk/reward at this point looks favourable. I am merely picking some strong companies to ride up this short term up leg of the broad market.

SAP has ZERO debt and $2 billion in cash! It isn’t going down anytime soon. The $34 support looks strong and the upside looks open. Max pain for Nov is $45. Again, I’m in this for a favourable risk/reward ratio.

Upside: $2B in cash and $0 debt. Battered software stock with a waterfall dive just 2 months ago. Possible reverse head and shoulder formation in the making. Confirmation if it breaks $40. Lots of unfilled gaps between $45 – $55.

Resistance: $40

Downside: Some sort of triangle forming, but volume not decreasing as shown in consolidation. Still an unfilled up gap below $33.

Support: $32.40, high of 10/28 and low of open gap.

Bottom line: At $34.50, the upside/downside ratio is about 2 to 1. Plus the broad market looks poised for a run up.

Related posts:

1. SOLD -1 ABB 100 NOV 08 12.5 PUT @1.70
2. SOLD -1 FRO 100 NOV 08 35 PUT @3.90
3. SOLD -2 ABB 100 FEB 09 12.5 PUT @1.20
4. SOLD -5 SLW 100 DEC08 7.5 PUT @4.00 LMT
5. SOLD -1 C 100 NOV 08 5 CALL @3.25