Email – #420

GE reported disappointing numbers this morning. Their earnings were impacted by weakness in their financial operations in March. While insignificant as a percentage of total earnings, the fact that the company missed on its own recently bullish guidance has caused a dilemma for investors. In this market, a dilemma usually equals selling now and asking questions later.

For us, the mini sell-off will be minor event, more giving up gains than taking any kind of major loss. That is the beauty of LEAPs. And, in this case with a spread, our losses on the option will be mitigated by the gains on the short option. More importantly, we are still in the game with a lot of time left to go.

As I said last week, I am not inclined to make new recommendations during this part of earnings season – if GE can disappoint, there is a lot more pain to come in the coming weeks and we need to bide our time and be ready to pounce on the right situation, at the right time.

Karim