Bought +1 COF 100 SEP 09 35 PUT @1.90, Mark 35.89

My limit order was executed at the open today for Capital One Financial (COF). I placed this yesterday at the close and totally forgot about it...

While we are testing a long term resistance (Figure 1, pink trendline at top of chart) at about \$36, there is no confirmation yet. The recent bullish momentum could very well sweep COF along to break it.

On the other hand, a look at S&P normalized by US Dollar Index shows the market is also pushing up against a significant resistance. I will make another post about this after the close today as a market analysis.

Thirdly, the divergence in sentiment based on high yield stocks or junk bonds v. market price is as obvious as ever. Although this has been the case for a while now, so this perspective doesn't hold much weight anymore. The market simply can be irrational beyond anyone's guess.

Entry: \$35.89

Stop: Above \$35.00, by next Tuesday.

Target: \$33, by next week.

I've updated my risk metric for options to incorporate the time parameter. A more thorough analysis can be gleaned from Figure 3 with the expected value of the options at 1, 2, and 3 weeks from now.

To be more precise, the Profit/Loss on August 28 is -\$41.5 if COF = \$36, and +\$110.6 if COF = \$33.

So the Reward / Risk = \$110.6 / \$41.5 = 2.7 \< 5. The R/R is predictably horrible. That's why I'm setting a tight stop on this. We'll see how today's push higher plays out and I'll probably ditch this sooner to minimize my risk.

[caption id="attachment_1706" align="aligncenter" width="500" caption="Capital One Financial"][Capital One Financial][][/caption]

[caption id="attachment_1707" align="aligncenter" width="500" caption="Capital One Financial"][Capital One
Financial][][/caption]

[caption id="attachment_1708" align="aligncenter" width="500" caption="Risk Profile"][Risk Profile][][/caption]

[Capital One Financial]: http://traderpau.files.wordpress.com/2009/08/2009-08-21-cof_prop.png [Capital One Financial]: http://traderpau.files.wordpress.com/2009/08/2009-08-21-cof.png [Risk Profile]: http://traderpau.files.wordpress.com/2009/08/2009-08-21-cof_risk.png