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Genworth Financial (GNW) Blows Past Q42011 Wall St. Earnings Estimates!! Stock Surges! Call Options Jump!! By: Tim Bolger

Thought I would make a quick post here to remind my Optionshoney readers and traders of my huge market call on Genworth Financial (GNW) prior to the earnings release last night after the bell. Attached is my previous post on 1/26/12 suggesting traders buy GNW Call Options on the stocks weakness that day ahead of the upcoming earnings release last night: https://optionshoney.wordpress.com/2012/01/26/gnw-earnings-on-feb-2-2012-buy-call-options-and-sell-put-options-on-stock-weakness-today/

GNW is the Biggest Gainer this morning in the S & P 500*Genworth shares shump 17%, S&P 500 best MarketWatch–9:36 AM. Mortgage delinquencies declined 73% year over year and GNW came in with a Q42011 earnings of 22 cents diluted earnings per share(EPS), beating the street expectations by 4 cents! All of this translated into big money made this morning on my previous post suggesting buying the 7 and 8 strike March 17, 2012 GNW Call Options! Go Bulls. Jumping with Joy this morning that’s for sure… Lock in your profits this morning or hold tight for a bigger upside move and more money made on these Call Options? If you own a bunch of contracts, it might be smart to take 30% off the table and lock in some huge profits made over night…Or just hold tight and ride this baby higher!! If GNW breaks above $10 and continues to move higher with financials, this stock may run to $12 in the next 30 days!! Stay tuned for more honey calls and mega options plays at Optionshoney.com. Yeah baby!!! Are you starting to feel the buzz??? There is alot of honey brewing on this site…Can you feel it?? This is a very exciting day for me and many other lovers of GNW. Remember at 9.25 a share, GNW is still cheap for long term investors. GNW has a book value of close to $33 a share.  Check out the 10 day chart below on GNW courtesy of Fidelity Investments:

Chart

GNW Earnings on Feb 2, 2012! Buy Call Options and Sell Put Options on Stock Weakness Today!? By: Tim Bolger

I discussed the big run up in Genworth Financial(GNW) over the past few weeks in a previous post on Optionshoney.com.  The broader stock market indexes are all in slightly negative territory this afternoon as gold and silver continue to march higher!!! What is the play on GNW into earnings next week!? I am personally sticking with my bullish call on GNW and want to have long exposure going into earnings next week.

What is the Options play?

Options Trade#1: I would think about buying the GNW March 17, 2012 7 and 8 strike Call Options. Gnw shares are trading down around 4% today and I would be a buyer of these options at 1.08 and .50 cents a contract. I can purchase 10 contracts for a $1.08 ($1.08 x 100 shares per contract x 10 contracts=$1,080) and 20 contracts for .50 cents (.50 x 100 shares per contract x 20 contracts=$1,000) for a total cost of $2,080 plus trading fees. For a few thousand dollars, I will get long exposure to 3000 shares of GNW going into earnings next week.  That is called leverage with purchasing Call Options. Buying 3000 shares of GNW stock today would cost me close to $23,100. If they beat the street and give any positive signals about a rapid decline in mortgage defaults or a housing recovery, this trade will be very profitable. If they miss and the stock tanks, I could lose a total of $2,080 plus fees on this trade. Remember options are very risky and extremely volatile.  Please remember to consult your investment advisor before making any stock or options purchases.

Options Trade#2: I would also be a seller of the Feb 18, 2012 7 strike Put Options for .30 cents a contract. If I sell 20 contracts I will credit $600 to my brokerage account. Worst case scenario, I get exercised on the shares and I have to purchase 2000 shares of GNW at $7 for $14,000 plus fees. By selling the Put Options I will reduce the cost of buying the 2000 shares by the $600 credit to my brokerage account.  Best case scenario, they blow out earnings next week and I keep the $600 without having to buy the shares…However, my long term outlook and price target on the stock is 17, so I like owning the stock at these levels.  The book value of GNW shares is close to $28 a share…Good luck Longs!! Till next time on Optionshoney.com.

5 Year Chart on GNW courtesy of Fidelity Investments:

Chart

Genworth Financial(GNW) Roaring Higher! Does Housing Bottom in 2012? By: Tim Bolger

Genworth Financial is a financial holding company, with its core business focused on selling insurance and additionally provides wealth management, investment, and financial solutions for individuals in the U.S. and around the World.  The three main facets of the business are: Retirement and Protection, International, and U.S. Mortgage Insurance.  See the full profile at http://finance.yahoo.com/q/pr?s=GNW+Profile.  The company has been very profitable historically, but the black swan events of the U.S. housing crisis and an unprecedented amount of defaults on mortgage loans that the company had insured led to alot of bleeding for GNW shareholders the last few years.  I have been following the stock for four years and I am beginning to see alot of value in the stock.  I believe that GNW will make it out of this housing mess alive and that it is well positioned to profit from a recovery in housing.  I strongly feel that long term investors buying more GNW shares on this temporary weakness in share price and peaking number of mortgage defaults will be rewarded in 2-3 years when the storm blows over.

GNW has been crushed over the past few years and has a high beta of 2.9 for all those momentum players out there.  I think that housing bottoms in the next 12-15 months and a significant decline in U.S. and European mortgage defaults would be great news for GNW investors.  Once the Mortgage insurance unit at GNW stabilizes and starts making money again, this will be the major catalyst and turning point for GNW stock to soar much higher.

From a deep value investor standpoint, currently GNW trades at $8.22 with a .24 Price to Book, .37 Price to Sales, and has a forward Dec 31, 2012 Price to Earnings of 6.5.  Those are extremely cheap stock valuation numbers that greatly support my thesis for buying GNW shares for the long term.  This stock could trade back to $24 a share and still be trading at only .75 book value. Wow!! Good luck to all of you Bulls…

GNW has rallied over 20% in the past 30 days.  I think the party for GNW shareholders has just begun.  Several financial stocks are rallying this week.  Check out my post yesterday on Goldman Sachs here https://optionshoney.wordpress.com/2012/01/18/goldman-sachsgs-call-options-active-on-q42011-earnings-beat-by-tim-bolger/ . Any traders that bought GS call options on my previous note made lots of money overnight as GS continues to rally higher today. Bank of America and several other financial stocks are up big again today as well.

GNW reports earnings on Feb 2, 2012.  Remember it is always a gamble to buy a stock before earnings releases, but I think GNW will beat Wall St. Analyst expectations and therefore, I want to own the stock and Call Options prior to the earnings release.  If they beat the street, the stock could sail 10% higher on positive news, especially on any positive report on a decline in mortgage defaults for their Mortgage Insurance business.  What is the Options Play on GNW?

Options Trade#1: If you are bullish on GNW going foward and would like to get long exposure to a continued rise in GNW shares, I  would think about buying the Mar 16, 2012 9 and 10 strike Call Options.  If GNW blows out earnings on Feb 2, 2012 these contracts will double or triple in value very quickly.  Remember that if GNW has a poor earnings report, these contracts will likely lose 30 to 50% on a bad report.  Alot depends on the EPS for the quarter and any forward looking comments by management that the housing mess could be nearing an end and any improvements in there mortgage insurance business. Attached are the Options Chains for this hypothetical trade courtesy of YahooFinance.  http://finance.yahoo.com/q/op?s=GNW&m=2012-03  I like the March 9 strike call options at a price of .30 cents and the March 10 strike call options for .09 cents.

Options Trade #2: For a more conservative and longer term trade, I also like buying the GNW Jan 18, 2013 7.50 Call Options for 1.90 a contract. Good luck to all and stay tuned for more news on GNW and the financials. Trading involves inherent risks and please consult your financial advisor before buying or selling any stocks/options. Optionshoney.com disclaimer.

http://finance.yahoo.com/q/ta?s=GNW+Basic+Tech.+Analysis&t=3m

Chart forGenworth Financial Inc. (GNW)

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