This is another deep, out-of-the-money put, half of whose premium you are likely to lose. How likely the loss is what needs to be estimated. If the odds are a coin flip or worse, then you back away. More favorable odds than random mean the trade should be done. Price your risks, and act accordingly.

Their yield-curve is negative. The short ratio on the common is 13.4% (and would probably be higher if the stock weren’t already trading under $5). Using my crude methods, I’d estimate a Chapter 11 workout at no more than $0.50 on the dollar at best, which is roughly what the bond market is saying, too, by the way it is pricing their debt.

The 7.875’s of ’15 would require a min purchase of five. The 7.375’s could be bought as a single bond. So they would be the maturity to focus on (unless you like “to swing a big line”, as Livermore would say). You’d be late to the trade, for prices already being off their March lows.

As usual, broker’s reported YTMs understate what I believe to be a better estimate of YTM’s. So run your own numbers, and do your other Due Diligence.

Issue			                Coupon	Maturity	YTM	Price	Cur Yld
E TRADE FINANCIAL CORP	B2	B	8.000	06/15/11	34.3	62.100	12.9
E TRADE FINANCIAL CORP	B2	B	7.375	09/15/13	28.3	49.100	15.0
E TRADE FINANCIAL CORP	B2	B	7.875	12/01/15	24.1	47.600	16.5