American Express - which put options to play?

A reader comment requested some input on which AXP put options to play.  Of course, options are by nature risky so this is not advice, just my opinion given in the name of financial entertainment.  But it if were my money I would look at the chart and see what is doable.

In formulating a response, it dawned on me that in my last post I did not really give the big picture which is needed in order to even think about whether options make sense much less which strike and maturity to go for.  Below is the big picture.  AXP was literally brought to its knees in 2009, trading as low as $10.  It is now up almost 10x that, clearly a mania peak multiple, based on the Bernanke put.

It is also showing an expanding triangle which, while not confirmed until the break down of the top rail, looks very unstable to me.  Note during the past two crashes that the sell off was very dramatic - almost a straight line down.  That is important when determining put option strikes and maturities.  You want to pick something that is conservative enough to be in the money at expiration but out of the money today so that the price is cheap.

I've drawn what I think is a very conservative crash wave considering the last two crashes.  I expect the top rail to be a bounce point but it should be short lived with a vee style bounce, not an extended sideways affair that tends to suck the life out of options.   One could buy nearer term expiration puts at higher prices but I would stick with the Jan16s.  You never know what games the government might try to play that will buy time for the markets and kill the time value of your options.

Bottom line, the Jan 16 60s are $1 bid, 1.20 ask.  Split the difference for $1.10.  Then dump them when the chart tests and holds the support line.  Wait until the 38.2 fib a-b-c retracement and then jump back into the same ones or go into the Jan 17 leaps which should be out by then and of course at lower strikes.

I've played this game before and it is fun and exciting but it is also hit and miss.  I got screwed last time by government mandating no short selling on the banks.  Government picked winners and losers in what was supposed to be a free market.  I was not an insider and so I lost.  I don't think it will happen again but it cannot be ruled out.  That's why I am mainly playing TVIX with my options money this time.  I will not make the 66x that I did on AIG puts back then but neither will I get trapped in options of plummeting value if government steps in to protect its buddies again.  I will get stopped out before it begins to really hurt.

I actually think the new conservatism is going to stop government from the level of good old boy protectionism that it got away with during the last crash and that this very fact will take a lot of insiders by surprise.  Like the liberal teachers who are getting fired all of a sudden and like the liberal concept of tenure in academia which has gotten so much support in the past, a trap door has opened beneath all of it and it is taking the whole liberalsphere by great surprise.

Note: if you are reading this and do not know what the terms put, call, strike, leap, expiration, out of the money, near or in the money or implied volatility mean, just forget you ever read this post.  Options are leveraged gambling of the worst kind for most people.  Those with insider knowledge or some other advance knowledge can get filthy rich using them.  Everyone else gets fleeced.