SOLD -1 ABB 100 NOV 08 12.5 PUT @1.70

[caption id="attachment_695" align="aligncenter" width="500" caption="ABB Ltd."][ABB Ltd.][][/caption]

Wrote an In The Money Nov 12.5 put for \$1.70. ABB share price was at \$10.92 at time of entry. I have been trading in and out too many times this past two weeks. This trade is intended to let it expire or let the option being put to me. I have the cash ready to buy 100 ABB shares if it doesn't expire for an effective price of \$10.80 / share.

Three reasons why I'm fundamentally bullish on ABB.

  1. \$8.6 billion in cash and \$2 billion in debt (0.2 debt/equity ratio)
  2. It is making use of this cash and current market panic to expand its operation. See: Cash-Rich ABB Speeds Up Buys As Markets Weaken. It's one of the few companies not afraid to act at this time!
  3. ABB makes power control and distribution systems. It's one of the largest builder of power grids. All these talk of alternative energy, reduce oil use, hybrid/all-electric cars, etc. have one thing in common -- electricity.

Upside: Good fundamental, active management to make use of current condition. Significant volume around \$10 last month.

Resistance: Recent top of \$14.

Downside: We seem to be in correction of 10/28 day, moving to low of about \$10.

Support: \$10

Bottom line: Risk/reward ratio of about 3 to 1. Not that great. But I can afford to have the shares put to me if this doesn't expire next week. Not saying I would sit still if it does collapse, but at least I'm not biting more than I can handle.

On another note, I entered because the market seem to be stronger today. Notice the Advance Decline line staying around neutral and the TICK not really down that much.

[caption id="attachment_697" align="aligncenter" width="500" caption="S&P intraday"][S&P intraday][][/caption]

Update: An hour later and we've broken down. ABB is at \$10.39 and S&P at 868. I guess I should have waited til the afternoon.

[ABB Ltd.]: http://traderpau.files.wordpress.com/2008/11/2008-11-12-abb.png [S&P intraday]: http://traderpau.files.wordpress.com/2008/11/2008-11-12-spxintra.png