Email – #403

The market is not enjoying a very happy new year. It seems to be getting worse daily as far as investing is concerned. Pessimism reigns supreme, and it appears that financial Armageddon is around every corner.

First, let me say that I am not particularly worried about the current market’s long-term prospects. In the short term, anything can and usually will happen. But, we are longer-term investors… when we have to be. That is why we use LEAPS and not short term options.

2007 provided us with some very nice gains, Schlumberger, Freeport, Tenet, Goldcorp, Microsoft etc. We also had a few hits. A couple of those hits are still with us in the form of Advanced Micro Devices (NYSE: AMD) and Cirrus (Nasdaq: CRUS).

I am more confident about Cirrus than AMD. That said, sell your AMD calls (VVV-AG) now , I doubt the shares will appreciate much in the months ahead – at least not enough to allow us to recoup our adjusted cost (recall this was part of a spread trade.)

On our other open positions, I have great faith in our current positions especially our newly initiated positions in the financials. We entered the Bank of America (NYSE: BAC) position a little early in hindsight, but we also have 2 full years left on the play.

On the Bank of America play, double down on your position. This is an official recommendation. We will adjust our entry price to reflect this additional investment, which will average down our cost.

Here is my recommendation:

Buy the Bank of America (NYSE: BAC) January 2010 $55 call LEAPS (WBA-AK) at current levels under $2 to average your cost lower.

BAC, like many of the other financials, is being taken to the woodshed. In the short term, this is a scary event. But behind the scenes, the liquidity spigot is on full blast and the effects of this monetary inflation will be evident in the second half of the year. We have a lot of time left and the options are currently very attractively priced.

On another note, we are changing the name of this service to The 400 Report. For years, only 400 companies qualified to trade as LEAPS.

There are few investors who understand the true power of LEAPS. Indeed this is quite an elite group. And to better show the exclusivity of our group we’re changing the name of this service to The 400 Report . Beginning next week, the alerts you receive will bear the logo of The 400 Report .