Ok so CIT group is up 26% after hours. Did you expect anything different? According to WhatsTrading.com CIT was an option volume leader today 72% of which were calls. Someone bought 60,000 August $2.00 calls this afternoon, why? You already know the answer but I will give it to you anyway:
- From the WSJ, “U.S. government officials are in advanced talks about providing some sort of aid to CIT Group Inc., one of the country’s primary lenders to small and midsize businesses, people familiar with the matter said.”
- Government officials are worried about unforeseen consequences as they are lender to nearly 1 million companies
The Fed seems cool with it, but in the end the Fed will suffer major losses, as will taxpayers.
TraderMark also makes an interesting point,
And let me finish this thought with… who else. We do NOT want this (fill in the blank) company to lose any money so bring all the King’s horses and all the King’s men (more importantly bring the peasants coins) to save the Gold Men again. Whatever is done, CIT Group must be saved. Otherwise – Goldman could lose money.
- The company secured $3 billion in financing from Goldman Sachs (GS) in June 2008.
The reasons for bailout suddenly became so much more clear.