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Drywall anyone? How to play USG on the rise.

Updated on June 29, 2012

Drywall anyone? How to Play USG

by Robb Hoff

June 29, 2012

If you bought 1,000 shares of USG on October 3 of last year at $6.13 per share, you should happily take your roughly $13,000 profit at $19 per share and call it a good 10-month return.

But if you didn't jump in on the drywall manufacturer when the price plummeted in the face of a dying housing market, you still can make up for lost time.

As an industry leader, it's hard to bet against a company that should have successfully increased its market share in the face of hemorrhaging demand.

You may even be tempted to jump in now in case USG hits $20 and sails toward pre-2009 housing market crash levels. And two or three years down the road -- whether housing starts recover because of demand from single owners or a rising breed of lifelong renters -- you could realistically double your money.

But if you're looking to churn some cash in the short term, the better way to play USG is to buy the July put at an $18 strike for $60 per contract. USG is still teetering at the national financial cliff that includes a grim forecast based upon domestic runaway debt and the impact a wilting global economy will have upon domestic financial markets.

You may not realize the whopper in gains you would've had if you had plunked down a gob of cash back in October, but if you bet the headwinds are stronger than even an industry leader dependent on housing starts and other strictly domestic economic indicators can weather, then seeing a $15 stock price for USG within two weeks time is not unreasonable.

With a quick turnaround at buying the market price at $15 and selling the stock at the $18 put, you would be looking at about an $800 for two weeks of nothing if you buy four puts that would put you on the hook for the same investment total that 1,000 shares would've cost in October.

$800 in two weeks is not preferable to $13,00 over a year, unless you just don't want to have to wait and rely upon terminally diseased financial markets to be there for you in the end.


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