Options picks

[pad191]

Bought June $40 JPM calls at the close. I think JPM sees $40 before it sees $35. That being said, things are not looking good the next few days, especially if we break Friday's intraday low of 1044 on the S&P.

Food for thought... Baidu put going into tomorrow evening's earnings. Wish the premiums weren't so damn high though!

[pdtpatrick]

Good news is.. the Euro is up:

1.3716

Since we are so worried about what they are doing and so far they are up -- I say we expect positive tomorrow. That's just me.

I'm gonna be looking at some JPM and GS here shortly. TM for a rebound long run like ChuckD

I like BAC too. GOOG will be fine (Lets see how BIDU does tomorrow). AAPL is pissing me off.

BTW - gotta get one Telecomms (VZ or T)

Annddd one retailer - maybe BBY (afterall, cramer was pumping them)

[pdtpatrick]

Bought:
QCOM
TM
VZ

Earnings today:
DIS - they've beaten their last three so I expect something good from them today.

Tomorrow - looking at:
BBY
DELL

[wy3134]

still waiting to see if i can get out of my GS and AMZN calls at a lower loss, not happening right now even with the green day, about to cut my losses before we have a red day tomorrow and it kills me even more...had i gotten out at open yesterday i would have had a $30 profit, now its a $300 loss

[pdtpatrick]

Don't go panicking now.

Did you buy Feb calls? Your time decay must be eating you alive with those.

We'll probably experience green until thursday when economic data comes out.

[wy3134]

i bought march calls... but it still seems during the day when it recovers that the price of them isnt recovering as much...i must have bought the ones with serious decay rates ($170 GS and $135 AMZN)

seems the bears are killing some of the major stocks, everytime the bulls try to come in, the bears run em back out

[pdtpatrick]

GS has been ranging for a while.. they need to test $160 and break above for a bullish move.

[wy3134]

yea, thats why im looking to break even or get out with as little loss as possible...realize know that calls on GS were a stupid decision. now the puts on GS are a smart call cause they seem to be making more $$ when it falls a couple dollars during the day (at least that was my experience last week when i traded a couple of them)

[pdtpatrick]

I think you are starting to invest emotionally since ur losing money and starting to think what if.

If you skeptical, then hedge your bets with verticals or straddle.. The sell off is necessary to correct the market but it was WAYYY Over done especially when the news hit about europe and such. Good news is EU might come in and bail out the failing nations so the Euro is up today (that and some other interesting news helped).

If you are doubting then sell your position and wait for a confirmed move up to jump back in or convert your position to a vertical and reduce your loss but making money on the way down.

Don't invest based on irrational decisions because you are losing. You can get hurt even more.

I think the theta on GS is killing your profits and thats where you are probably losing a lot of your money. Maybe its time to get out and rethink your position and create some better but if you hedge, you reduce your theta and reduce your loss since you will be paid a premium rather than you paying the premium.

[wy3134]

agreed, im letting the red affect me too much... but luckily im not as trigger happy anymore, and although im letting emotion get the best of me, im not letting it completely take control of my quick actions on making the actual trade

im lost when you say hedge, and reduce my premium, etc. (really i just dont understand what i need to do in this instance you talk of)

also one thing that kills me is I only have level 2 options trading permission, so idk if i can do straddles and stuff that you talk of

[pdtpatrick]

When I mean hedge is.. you play both sides.
So you buy 1 call and sell 1 call
When you buy a call, you pay someone the premium so your account losses money and u make money if the stock goes up.
When you sell, you get paid a premium so ur account is credited and u make money when the stock goes down.

So what happens is, you won't make much of a gain since you're basically balanced but you don't lose much as well.

With verticals, you have your bullish and bearish vertical.

So if you bought the $170/$175 verticals, your max profit is $5 and you make money as long as the stock continues up. It's hard to understand at first so go here and read this:

http://www.investopedia.com/terms/v/verticalspread.asp
https://www.redoption.com/options_basics_verticals.php
https://www.redoption.com/strategy/59/

[wy3134]

ah ok thanks for the explanation, makes total sense! definetely jumped into the options game long term way too quick not understanding it going both ways to cover my potential losses.

[pdtpatrick]

Sometimes its good to take two steps back - see where you are going or at fault and then try again. You might also want to utilize your paper trading a bit more to test your strats before diving in.

Options are hella risky, easy to get your butt whopped on a daily basis and very hard to make money. But once you get a hang of things, its a good alternative to making $$$ along side stocks.

[pdtpatrick]

SAN FRANCISCO (MarketWatch) -- Baidu Inc. /quotes/comstock/15*!bidu/quotes/nls/bidu (BIDU 472.64, +37.63, +8.65%) said late Tuesday that its fourth-quarter profit rose 48.2% to 427.9 million yuan, or about $62.7 million, or $1.80 a share. Excluding one-time items, the Chinese Internet portal would have reported earnings of about $1.88 a share. Revenue rose 40% to 1.26 billion yuan, or about $184.7 million, from the year-ago period. Analysts surveyed by FactSet Research estimated a quarterly profit of $1.82 a share on revenue of $177.4 million. U.S. shares of Baidu rose 8.7% to $472.96 a share in after-hours activity.

[pad191]

Mm, great quarter by BIDU. I still don't like 'em. The valuations are too lofty, they are nowhere near Google status and yet are traded as if they are Google, and the chart is just asking to break that trendline and start a rapid decline into nothingness. But for now, the trend is higher. Options on both GOOG and BIDU are too high for the average investor and aren't worth it. One reason the put premiums were so high on BIDU yesterday was because a lot of institutions who are long BIDU used the puts as protection on their positions, they bet big that BIDU will continue to go up and they were right.

I sold my FCX call mid-day today, got out with a nice 25% profit. Held onto my JPM and FWLT calls for another day, but I'm starting to hear very bad things about the market from various CNBC articles/blogs and Fast Money. I don't like it one bit and if we rally tomorrow, I might exit all my calls and pick up a few puts or calls on bear ETFs to play out the rest of the week. The action in the market for the past few weeks does not look like the typical "correction" in a bull market. It has the same feel to it as Fall '08 or early '09, except without the 800 point down days.

Also, from my limited experience in options I have learned that the best discipline if you are trading options solely for profit and not using them to hedge your existing positions, you should never buy an option with a long-term mindset. If you want to play long-term, buy the stock itself. If you're buying the option, look to exit within a week at the most. Take the loss if you have to, but don't hold onto a losing option position just because you believe in the "long-term prospects." If the stock doesn't move, your call will lose value. If it goes down, it loses a LOT of its value.

The best way to play options is to combine technical indicators (when multiple signals of a stock being oversold align, it provides the perfect opportunity to snag a few calls) with best of breed names (you don't want to buy options on small, lesser known companies, especially due to low volume, high spread, and low open interest).

Remember, do your own due diligence, and that doesn't just mean researching companies, but researching how options work and how risky they can be. I've lost quite a bit through options, but I continue to use them because I have learned a bit from my mistakes and I find that they are an extremely useful trading tool.

Here's to another green day tomorrow for all of us still long.

P.S. wy, if you look at Fast Money on CNBC, one of the traders has been saying that the charts of GS and MS are broken and they will continue to trade lower unless there is a strong move up. I suggest you figure out what your max pain is, how low you're willing to go before bailing. Personally, I think if GS breaks $148, it is in a LOT of trouble and it might go down as far as $120. Also note that there's been consistently higher volume on the way down for GS than on the way up since last August.

[pdtpatrick]

Mm, great quarter by BIDU. I still don't like 'em. The valuations are too lofty, they are nowhere near Google status and yet are traded as if they are Google, and the chart is just asking to break that trendline and start a rapid decline into nothingness. But for now, the trend is higher. Options on both GOOG and BIDU are too high for the average investor and aren't worth it. One reason the put premiums were so high on BIDU yesterday was because a lot of institutions who are long BIDU used the puts as protection on their positions, they bet big that BIDU will continue to go up and they were right.

I sold my FCX call mid-day today, got out with a nice 25% profit. Held onto my JPM and FWLT calls for another day, but I'm starting to hear very bad things about the market from various CNBC articles/blogs and Fast Money. I don't like it one bit and if we rally tomorrow, I might exit all my calls and pick up a few puts or calls on bear ETFs to play out the rest of the week. The action in the market for the past few weeks does not look like the typical "correction" in a bull market. It has the same feel to it as Fall '08 or early '09, except without the 800 point down days.

Also, from my limited experience in options I have learned that the best discipline if you are trading options solely for profit and not using them to hedge your existing positions, you should never buy an option with a long-term mindset. If you want to play long-term, buy the stock itself. If you're buying the option, look to exit within a week at the most. Take the loss if you have to, but don't hold onto a losing option position just because you believe in the "long-term prospects." If the stock doesn't move, your call will lose value. If it goes down, it loses a LOT of its value.

The best way to play options is to combine technical indicators (when multiple signals of a stock being oversold align, it provides the perfect opportunity to snag a few calls) with best of breed names (you don't want to buy options on small, lesser known companies, especially due to low volume, high spread, and low open interest).

Remember, do your own due diligence, and that doesn't just mean researching companies, but researching how options work and how risky they can be. I've lost quite a bit through options, but I continue to use them because I have learned a bit from my mistakes and I find that they are an extremely useful trading tool.

Here's to another green day tomorrow for all of us still long.

P.S. wy, if you look at Fast Money on CNBC, one of the traders has been saying that the charts of GS and MS are broken and they will continue to trade lower unless there is a strong move up. I suggest you figure out what your max pain is, how low you're willing to go before bailing. Personally, I think if GS breaks $148, it is in a LOT of trouble and it might go down as far as $120. Also note that there's been consistently higher volume on the way down for GS than on the way up since last August.

Very sound advice.

I'm looking forward to tomorrow (so far it seems we might go green). However, I think i might exit most of my positions tomorrow as retail data comes in on thursday and sentiment on friday. The market is nutty right now so I would take my gains as they come. It seems to me things fly off early in the morning and then sizzle during the day. So I will be looking to exit early.

I like the 1 week flip strat you have, its a good idea. However, if you can find a good time decay for an option, and it costs next to nothing then you should definitely test the water and long it if the potential gain far outweighs the short term loss.

Saw DIS pull it off huh? Not bad. Nikkei is up so far and Euro is trying to stay above 1.38 but its fluctuating so we are getting pretty good vibes so far.

I've been looking at a lot of charts especially JPM and a few other financials and techs, and they seem to just be waiting for some type of consumer confidence to fly. They are quite oversold but that doesn't mean they won't fall further.

That being said - cheers to tomorrow. BTW - ATVI is expecting some good numbers.

[pdtpatrick]

Japan shares rise as chip makers, shippers advance

TOKYO (MarketWatch) -- Japan's Nikkei 225 rose Wednesday morning in Tokyo, finding support from gains on Wall Street after tallying a four-session loss of more than 4%, with chip makers and shippers among the advancers. The Nikkei 225 added 0.8% to 10,010.33 and the Topix climbed 0.5% to 886.18. Chip maker Elpida Memory Inc. /quotes/comstock/!6665 (JP:6665 1,493, +24.00, +1.63%) /quotes/comstock/11i!elpdf (ELPDF 17.60, -2.15, -10.89%) was up 2.6% and Advantest Corp. /quotes/comstock/!6857 (JP:6857 2,075, -20.00, -0.95%) /quotes/comstock/13*!ate/quotes/nls/ate (ATE 23.49, +0.24, +1.02%) tacked on 3%. Shipping company Mitsui O.S.K. Lines Ltd. /quotes/comstock/!9104 (JP:9104 541.00, +1.00, +0.19%) /quotes/comstock/11i!mslof (MSLOF 6.50, -6.50, -50.00%) also added 3% and Nippon Yusen K.K. /quotes/comstock/!9101 (JP:9101 326.00, +7.00, +2.19%) /quotes/comstock/11i!nyukf (NYUKF 3.57, -0.02, -0.50%) climbed 2.5%. Toyota Motor Corp. /quotes/comstock/13*!tm/quotes/nls/tm (TM 75.06, +0.46, +0.62%) /quotes/comstock/!7203 (JP:7203 3,375, +95.00, +2.90%) added 0.7% after announcing a fresh recall on Tuesday. Elsewhere, South Korea's Kospi added 0.6% while Australia's S&P/ASX 200 was 1.4% higher.

[pdtpatrick]

CAM looks good here

Cameron International(CAM Quote) is leading a rally among oil services stocks on Tuesday, as its solid earnings indicated to some energy investors that the outlook on oil services may be changing from a barrel half-empty to a barrel half-full story.

Cameron was up just short of 7% in afternoon trading, on a day when the energy sector as a whole was rallying. "All the energy stocks are in the green today on my screen," said Stephen Gengaro, analyst at Jefferies.

Cameron had seen almost one million more shares traded than on an average day also -- 3.8 million shares versus 2.9 million on average. And while trading spikes in the energy sector are common, the increase in trading of Cameron shares on Tuesday was still above the typical level of volatility in the trading range of oil-services stocks.

[pdtpatrick]

Interesting chart of the DOW in the last six months.

[wy3134]

sold my amazon calls for a nasty $250 loss...lesson well learned and will benefit me in the future.

still waiting to see what GS does to finish the day before i decide to take my loss on that and move on.

EDIT: out of my GS calls now as well...gonna step back for a day or two and be a little smarter about my plays.