GNW is getting interesting again as they struggle back to $5 after almost hitting $4. Great research piece in SA (surprising) and, while the risk is certainly there, the reality is that, outside of taking a 0.56 hit selling a losing division last Q, they would have made 0.24 and they still need to raise cash so most likely they'll cut something else but then they'll be in much better shape going forward.
At $2.5Bn they can make $600M/yr and even if you assume rate hikes are going to hurt them, even $300M a year (not likely) isn't terrible for $2.5Bn.
2017 $5 puts can be sold for $1.30 and that's that for net $3.70 (26% off) and, even if your margin is 100%, your profit is 35%, which isn't bad for 16 months.
GNW bottomed out at $2 in 2009, when we thought the World was ending but it didn't and then they were $15 a year later (and then $5 and then $15 again and now $5). So, if you want to get more aggressive (or just play aggressive):
Buy 50 2017 $3 calls for $2.70
Sell 50 2017 $5 calls for $1.55
Sell 50 2017 $3 puts for 0.55
That's net 0.60 so your worst case is owning them at net $3.60 and we can afford to own 5,000 at $3.60 ($18,000) in the LTP and, even if they go down to $2, we could DD at $2 and average $2.80 and then sell 2018 $3 calls for $1 and then we're net $1.80 on 10,000 shares (the same $18,000 but twice as many!). I think we can live with that worst case, right?
