Time to cover your SAP shorts and take 15% profits
Today's Financial News - Posted October 4, 2008
SAP shares have finally dropped in the mid-$40s… it’s time to cover our short position
by J. Christoph Amberger
Baltimore — (TFN): It’s about time! Back on June 23, I wondered out aloud “Could SAP be heading for an ADCT-like drop in share prices?”
My razor-sharp line of argument back then: “As the U.S. and global economies slow down and businesses get more reluctant to commit hundreds of millions of dollars in new software expenditure, there is a good chance that we will see the stock price dropping into the mid-$40’s by Q1 2009. Risk-embracing traders should consider some long-term out-of-the-money put options on the stock.”
(Plus, I had yet to find an SAP customer whose positive experience with the software applications was not an obvious result of Stockholm Syndrome…)
SAP AG (NYSE:SAP) traded at $54.50 that day. And it did what most stocks like to do after I recommend them: For the first couple of weeks, they do the exact opposite I’m expecting. But finally this past Friday, the stock closed at $45.65, down -16.24% over our recommended short price.
After-hours trading indicates a 3% increase in the share price, so this is the time to cover our short position while we’re ahead! If you followed my advice and purchased some put options, you’re WAY ahead of the game.
But as you take your profits, please make sure you sign up to our free email letter — you can do so right here…
Next Article: Dividend income: Earnings fall, you win
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