Sponsored By:

Shaw Group (SGR)

January 12, 2009

Dear Fellow Options Traders,

On Nov. 26, we recommended you sell the Shaw Group (SGR) April 12.50 Puts for $2 or better. Today, the bid/ask is 25 cents by 35 cents. We believe if you are patient, you will be able to close half of your position in the next day or so for 30 cents and capture an 85% gain.

Last week, SGR reported robust earnings and appreciated about 20% on the news. We decided to wait on closing the $12.50 put option because we wanted time to continue to erode the option value. Remember, we are short this option.

While we waited, the cost to close this short position dropped from about 55 cents to 30 cents. So, we recommend buying to close half of your position in the SGR April 12.50 Puts (SGRPV) for 30 cents or cheaper.

We continue to like SGR fundamentally and are willing to let half of our position remain on the table, as time should further erode the value of the $12.50 put. With the stock trading in the mid-$20s and with the earnings announcement behind us, we believe there is little near-term risk and we will see SGR fall below the $12.50 strike price.

Have a great day trading.


Nick Atkeson and Andrew Houghton
Editors
Options Trader