Luck, Poker, Investing and why luck matters!

June 2, 2007

A short run of bad luck can realy wreck havok on your portfolio. I knew I was having a run of bad luck when while playing No-limit Texas Hold’em poker. I keep having my full house beaten by a four-of-a-kind, flopping a nuts straight only to be beaten by a full house by the turn, having pocket aces lost to pocket 8s in preflop all-in showdowns.

Similarly, my portfolio suffered. My core holding – Suntech Power (STP) – reportedly announced capacity expansion by about 30% (due to explosive demand for solar panels) but the stock dropped due to weakening margin concerns. WHAT is with these investing wall street types?? So what if I earn only 10ct per item sold instead of 12ct when I can sell twice as many items??? I still make more money right??? Don’t tell me they recommend selling less to earn more per item?! No, what they want is to sell more and keep the margin intact… talk about having your cake and eating it! While I know that the stock will appreciate accordingly in the long term, options are wasting assets and my options expire in July. I don’t have time to wait for them to wake the f**k up!

So contrary to what I used to believe, I think Luck IS a factor in both poker and investing… so perhaps I should consider adding Feng Shui to my portfolio….

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A solid investment option that combines retail therapy

April 8, 2007

2006 Gold BuffaloOne way of spending money without spending money is to purchase gold coins – specifically collectible bullion gold coins.

Bullion gold coins offer investors a way to invest in gold in small amounts. These coins are valued by the amount of gold they possess, usually by the ounces.

Sometimes, it feels like I am spending money to save money by doing so… its truly amazing. Saving money becomes so much easier when the act itself appears to be spending money! 🙂

The image above shows a one ounce 2006 US Gold Bullion coin of the Buffalo series. This is the first 24 karat gold bullion coin minted by the US Mint. Previously, US bullion coins are struck in 22 karat gold.

However, my favorite coins has been the Chinese Panda series of gold bullion coins. I acquired one of the 2006 panda gold coin for $700 last year and now it is worth $790. The 13% gain may not sound very impressive but considering that it is supposed to be a purchase, an expense.

Imagine a TV set you bought for $700 can be sold for $790 after you had used it for a year!

Diamond Rings and Stocks

April 6, 2007

While researching on diamonds for www.diamondave.net, I suddenly realised that if I had bought some TIF call options like 2 months back, I could have been researching on a big purchase instead.

I knew that Tiffany is undervalued and should appreciate to somewhere around $55 in maybe a year’s time but just did not realised it had gone up so fast (from $40 to now $47 in less than 2 months). I am bullish on Tiffany’s recent foray into China, which I consider to be a good long term strategy, and long term is like 2 years – not 2 months.

So I went into LJ International (Nasdaq: JADE) instead. It is a pure China jewelry play with some very aggressive growth and a market cap of less than 10% of Tiffany’s.

JADE however, hovered around the $10 while TIF rallied… *sigh*… well hopefully JADE trade at $12.50 soon so that my JADE JUN 7.50/12.50 bull call spread can hit MAX profit!

Blue Nile downgrade

January 15, 2007

Just when shares of Blue Nile almost hit the $40 mark, it was downgraded by Citigroup. This tells me that the stock price will continue to trade between $35 and $40 until the next earnings announcement. Selling the $35 puts should be a safe trade. For the more aggressive trader, the $35/$40 short strangle looks tempting too.

Another Shot at Suntech Power Earnings Play on 20th Nov

November 18, 2006

Shares of Suntech Power (NYSE:STP) dropped almost 10% on 16th Novemeber – 2 days before options expiration. It fell from $28.50 to $26 on no news. Read somewhere it may be due to something known as pinning or whatever that is related to options expiring. Not too sure about the mechanics but I seen it happened many times before so I am sort of a believer now.

Looking to buy some STP DEC 25 call options to play the earnings on 20 Nov. Have to buy the DEC options because the NOV options expires today!

I have always been a great fan of this stock. I reiterate that Suntech Power is the best solar stock in the market.

The following reasons sums up why I think STP is a great long term play.

1. Leader in Solar and Solar is the way to go for alternative energy.

2. Low cost manufacturing in China.

3. Locked in long term supply for polysilicon – a key raw material – with major suppliers like MEMC.

4. Finally and most importantly, demonstrated consistent quarter over quarter revenue and earnings growth.

So I bought some DEC 25 calls on Friday for $3.10 a piece when shares were trading for $27 each. Gotten pricey due to a last minute upgrade by Thomas Wiesel. Shares were up to $27.88 in the afterhours trading – almost to where it was 2 days ago.

Update: Sunpower (SPWR) just acquired Powerlight – a major solar systems provider in America. Perhaps this is the reason for STP’s recent decline. On the other hand, SPWR getting stronger and more promising now. Maybe good to buy some when they hit the low 30s.

Surprises from NCTY and STP

November 17, 2006

Shares of The9 Ltd. (NASD:NCTY) shot up a day after the company reported a sharp rise in profit and the completion of server upgrades that slowed it down in the quarter.

I comtemplated a straddle play days before but decided against it as it will half my ROI and double my loss potential. Lucky for me, I stuck to my out-of-the-money call.

Shares hit as high as $29.20 before closing at $28.36. I exited my call position early when shares were trading at around $27.60 about one hour into trading. Bought my NOV 25 call for $0.60 and sold them for $2.20. Hooray!

Hmm… I should have held out for more but since it had hit almost 300% ROI, I thought better not coz actually, I didn’t think the earnings report was that fantastic though…

What a beautiful chart…

NCTY 5 day chart (16 Nov 2006)

Alas! My overall portfolio value took an unexpected dip though due to a strange sudden decline of my Suntech Power (NYSE:STP) position.

What an ugly chart…

STP Stock Chart 16 Nov 2006

Early Exit for OXPS Iron Butterfly

November 15, 2006

Two weeks ago, I entered an iron butterfly spread on OptionsXpress (OXPS) with the middle strike at $30. As of yesterday, I thought the best I could muster will be to breakeven on this one coz OXPS was trading at $28 and only a few trading days remain before the November options expire.

Today, the entire market surged due to some comments made by the Fed Officials, according to the Associated Press. Well, I have no idea what they said – and neither do I care actually – but the surge brought OXPS to $29.50 in the afterhours trading.

So tomorrow, I am going to take this opportunity to exit this otherwise losing trade with a profit. Hopefully, OXPS opens at $30. I am not going to hold this till expiry even though its just a few more days because I think the rally may be sustainable and push the price over $31.50 and turn my iron butterfly into a losing trade again! So, nope! Not taking any more chances here!

CBAK Covered Calls Looking Good

November 14, 2006

After beating myself up for not buying more STP call options when stock price was $24 two weeks ago ($27 now as I blog), its time to go back to scouting out more opportunities in this exciting world of options trading. Hey Xcalibus, $24 is very low already!! What the **** were you thinking!??

Anyhow, going back to this topic, after checking thru my portfolio, I came across some CBAK shares sitting in my account.  Bought them for $5.79 a share in August, now they are $7 a piece. A paper gain of 20% over 3 months. Not too shabby. For your information, CBAK, or China BAK Battery Inc. is a Chinese company (yes I love China stocks!) that makes lithium batteries – lots of batteries. They have probably sold like US$100 million worth of batteries last year. Bought their stock at the time because I thought the Tesla Roadster is a really cool idea – an idea that may soon change the way cars are built. Oh boy, how many tonnes of batteries will they need by then huh? Huh?

Remember this car?

Back to the Future!

We are going BACK! To the Future!

This baby's electrical... 1.21 gigawatts...

Yes! But its gonna take like a few years (or a decade!) at least for that future to happen and judging from how the stock price of CBAK been trading lately, this multibagger is not going to happen anytime soon. So I was checking on the prices of the call options on this baby and found that the DEC 7.50 out-of-the-money calls are selling for $0.60 a piece. Obviously some folks think this baby is going to hit at least $8.10 by mid December.

You know what? I hope he is right! I going to encourage him by selling him my CBAK Covered calls! If he is wrong, I hope he is right by January 07 coz I will again sell him some covered calls!

I earn 3 x $0.60 = $1.80 if he is wrong 3 months in a row. If he is right and CBAK hits $8.10, I will also earn $0.50 from my shares and another $0.60 from selling the calls for a not too shabby total of $1.10 in one month’s time.

What the heck am I talking about? This blog post is not a good tutorial on how covered calls work. Check out this article to learn more about how to profit from writing out-of-the-money covered calls on shares you plan to keep long term.

A Better Way to Gain Leverage than Buying on Margin

November 13, 2006

Five years ago, when I just started investing, I read books about great investors like Warren Buffet, Peter Lynch – people who made big bucks investing in stocks. So what better way to start than to emulate the legends of investing and all they talked about are stocks. So at that time, I have not heard about derivatives. Or rather, all I have heard about derivatives is that they are very risky and people lose lots of money trading derivatives so I basically avoided them.

However, when I started dvelving into options, I realised they provide so much versatility that I asked myself why didn’t I learn about them sooner. For instance, if you don’t know about options and just started buying stocks to invest, you might possibly come across concepts like buying stock on contra or buying stocks on margin. These are the financial tools available if you are very bullish on a particular stock and looking for some form of leverage so you can earn more from your sound judgement. However, after I learn about options, I found that gaining leverage by buying stock on margin is so much more inferior to simply buying call options. Read on to find out what I mean.

The Mobile TV future

November 13, 2006

Imagine a future where you can watch TV whenever and wherever you are without paying for anything except perhaps the TV enabled phone? That future may not be very far away. Recently Google launch a Gmail Application that you can download and install onto your cellphone. Using my Nokia N73 and 3G connection, I was able to download the application in seconds. I uninstalled it because I had 3G connectivity on my cellphone which allow me to connect directly to Gmail using the Mobile Web Browser. However, I thought to myself, what’s stopping Google from letting me download an application that lets me download YouTube videos?

Mobile TV

Personally I would not mind viewing a 30 sec commercial if I can download an entire episode of say South Park. Hopefully my Nokia JAN ’09 LEAPS Options will benefit from this trend. Nokia’s multimedia computer series of cellphones are great devices for viewing mobile TV.