The other trades I thought about doing where all bullish. They are related to a previous post “The Barron’s Effect”. There were several stocks mentioned very positively this week in Barron’s. How did they do compared to the four and one half percent fall in the overall market?

Baxter International is a medical equipment and supply company. It was up one half percent today.

Waste Management Inc is the biggest trash hauler in the country. One of the feature stories put it on the Green Dream Team of companies since it does so much recycling of the trash it picks up. The market was not convinced, WMI was down 4.4% with the rest of the market.

FPL Group, Florida Power and Light, is an electric utility and has a non regulated subsidiary that produced energy from wind and sunlight.  It is another Green Team Member.  FPL was down two percent today.

Jacobs Engineering,  a third team member, was down ten percent today.

So much for the Barron’s effect of that article

I’m glad that I tested it rather than traded those ideas.

Here is the chart that shows the result:

Date          2/25/2009        2/26/2009
Stock   FLS     46                          54
45 call             4.1                           8.3
45 put             3.8                           1.2

Total               7.9                           9.5

Return 1.6 / 7.9 = 20%

Yesterday, I bought the 45 straddle, that is, calls and puts both with a strike of 45 which was close to where the stock, Flowserve, was trading. It cost me 7.9 for each straddle. They announced good earnings last night so the stock opened much higher. Around 10 AM I sold the straddles for $9.50 each and made 20%.

Really, you only need to hold the position overnight. The risk is that the volatility goes out of the options and they collapse in price. But right now earnings are very volatile and there are a lot of surprises. So it seems to me that this is a fairly safe trade.

More to come tomorrow. I will try a few more of these trades overnight tonight.