Insuring My LDK Investment By Buying Puts

Nov. 1.07 | About: LDK Solar (LDK)

If you're one of the many speculators who chose to invest in LDK Solar (NYSE:LDK) instead of going with one of the more stable names like SunPower (NASDAQ:SPWR), SunTech Power (NYSE:STP) or First Solar(NASDAQ:FSLR), then you're already in a deep state of shock. As if the false claims of inventory against LSK Solar were not enough, the company is run by a bunch of people who have seemingly done nothing to curb the stock's massacre.

While all solar stocks are going up with rising oil prices, investors in this stock have been going through restless times, never knowing what the next bad news will be. Piper Jaffray downgraded the stock yesterday and there seems to be no end to the stock's decline.

However, after being long this stock for a while, I have a suggestion for the investors long this stock. Please buy some Nov 30 or Dec 25 puts on LDK Solar. Earnings are supposed to come out next Thursday, and if something goes wrong, this stock will go below 30. In that event, you really need to be ready and minimize your losses, and who knows maybe even gain from the transaction.

I bought 10 contracts of Nov 30 calls, and at the price they are right now, they're a really great deal. Your losses are very minimal if luckily enough the stock shoots up, and its worth the peace of mind you'll gain, knowing you're insured against disaster. I hope you realize that the lawsuits against the company mean nothing to you. Even if the case is won, you see very little of what you lost and is hardly any consolation.

Disclosure: Author has a long position in LDK