Merrill Lynch (MER) experienced higher than expected earnings in the fourth quarter. Earnings increased 68 cents to $2.35 per share. Large equity gains and investment banking results were cited as the main reasons for the increase.
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Merrill Lynch CEO, Stan O’Neal, made the glowing statement, “By virtually any measure, our company completed the most successful year in its history,” in a company press release.
Merrill Lynch benefited this year from the overwhelmingly bullish environment in the capital markets. The company’s Global Markets & Investment Banking segment generated approximately 55% of Merrill’s net revenue.
The CEO was also optimistic about future prospects saying Merrill Lynch was “positioned better than ever to capitalize on the array of opportunities still emerging around the world.” This statement was in reference to non-US investments where the company’s growth was nearly double its US results
Of note, Jim Cramer recommended Merril Lynch in his JAN 12 Mad Money recap.
Competitors:
Competitors for MER include: Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), Citigroup Global Markets Holdings Inc. (private), AllianceBernstein Holding LP (AB), Edwards (A.G.) & Sons Inc. (AGE), Franklin Resources Inc. (BEN), Bear Stearns Companies Inc. (BSC), J.P. Morgan Chase (JPM), Lazard Ltd. (LAZ), Lehman Brothers Hldgs. Inc. (LEH), Nomura Holdings Inc. (NMR), Charles Schwab Inc. (SCHW), and State Street Boston Corp. (STT).
Potential Trades:
| Covered Call – Merrill Lynch & Co. Inc. (MER) $ 95.40 (29) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Inch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MERBS | 07 FEB 95.00 | $2.40 | 2.50% | 2.20% | 2.20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread — Merrill Lynch & Co. Inc. (MER) $ 95.40 (29) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
% Return |
Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MERBS | 07 FEB $95 | $2.40 | MERBQ | 07 FEB $85 | $10.80 | 19.00% | $93.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered call trade, an in the money covered call, offers 2.5% downside protection and a potential profit of 2.2% in 29 days if the stock remains unchanged or rises. The net cost of this trade, per 100 options, is $9,300.00.The second trade is a bull call debit spread. This trade offers 19.0% potential profit if the stock remains above $95.00. If the stock decreases below the break-even price of $93.40, the investment begins to lose money. If the stock price goes below the lower strike price of $85.00, the entire investment is lost. The net cost of this trade, per 100 options, is $840.00.
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[tags]Citigroup Global Markets Holdings Inc., AB, AllianceBernstein Holding LP, AGE, Edwards (A.G.) & Sons Inc., BEN, Franklin Resources Inc., BSC, Bear Stearns Companies Inc., GS, Goldman Sachs Group, JPM, J.P. Morgan Chase, LAZ, Lazard Ltd., LEH, Lehman Brothers Hldgs. Inc., MER, Merrill Lynch & Co. Inc., MS, Morgan Stanley, NMR, Nomura Holdings Inc., SCHW, Charles Schwab Inc., STT, State Street Boston Corp., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]