Archive for November, 2006

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.

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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.

Warcraft Options Play

November 8, 2006

Been playing World of Warcraft for about a month now and as far as MMORPGs (Massively Multiplayer Online Role Playing Games) are concerned, this one’s a winner. Unlike most other MMORPGs, this one is very well thought out. It’s easy to play but difficult to master – a trait all great games possess. Not since Ultima Online has any MMORPG gotten my seal of approval.

Unfortunately, the game’s developer, Blizzard Entertainments, is not a listed company. In fact, its a subsidiary of Vivendi, a french media company. There is, however, a NASDAQ listed company call The9.com (NCTY) that you can buy if you think World of Warcraft will still be a smash hit for the next 2 to 3 years. Or rather, a smash hit in China. You see, The9.com is a Chinese internet gaming company which is the sole distributor of World of Warcraft in China. In barely one year, the number of WOW players in mainland China has grown to 1.5 million! Another reason why I think the Chinese will love to play such games is that I believe people living in overpopulated areas, like in China and Korea, will find such games a great escape into another world.

NCTY is poised to announce its 2006 Q3 earnings on 15 Nov. Shares are currently $24 a piece. The year high was $30 but was down recently due to some server outage issues with the game. My guess is that with explosive growth comes such problems. These are problems you wish to have if you are a business.

Bought some NOV 25 call option for $0.60 a piece to play the earnings. Not cheap and definitely speculative. 🙂

Updated 13 Nov ’06: 2 more days until earnings are announced. Came across an article mentioning that the number of concurrent players of the WOW game did not increase during this quarter. Makes me wonder whether I should purchase a NOV 25 put option to implement a long straddle strategy instead.

Google + YouTube = Cable TV on the net?

November 5, 2006

While having a discussion with some friends over how Google has overtaken Microsoft as king of the tech world, the question on why Google paid $1.6 billion for YouTube surfaced. Like many of Google’s major initiatives, there must be a grand masterplan behind it all.

I’ve spent some time mulling over it and the conclusion I am getting is that Google may soon be partnering with content programmers to offer free Video content online and share a cut of the advertising revenue with them – similar to their current Adsense program. The only difference from traditional Adsense program is that the content is video instead of webpages. Users may for example watch Southpark on YouTube and be ‘forced’ to watch some commercials halfway through the video. Unlike cable TV where the same ad is shown to everyone watching the show, the advertising can be more targeted since each individual viewer can be show different ads based on the user’s age, gender, profession etc.

It’s a win-win situation for all because firstly, the user benefits because they don’t have to pay for Cable TV anymore. The content programmers can earn from advertising and thirdly, the advertisers benefit because their ads are now more targeted since YouTube will be using Google’s renowned contextual targeting technology to show the video ads.

Ultimately, they aiming for a slice of the $70 billion TV ad market. Not a bad move I suppose… maybe I should buy some GOOG LEAPS Options soon… 

Blue Nile Trading Options

November 4, 2006

I’ve been thinking about Blue Nile (NASD:NILE) lately… after the recent earnings report, shares were down from $40 to around $36 now. I don’t see any near term catalyst for the stock to go up and beyond $40 anytime before the next earnings announcement in say late Jan or early Feb 2007.

As such, my guess is that the stock price should trade in the range between $32 to $37 until then. A quick look at the option price reveals that I can enter a JAN 30/35 bull put spread for $2 credit. Looks like a pretty safe bet to me.

To all Blue Nile fans out there: any better way to play this stock?

OptionsXpress (OXPS) NOV $30 Iron Butterfly Options

November 2, 2006

Shares of OptionsXpress (NASD: OXPS) appears to be trading at the $30 resistance level. Both the November at-the-money calls and puts are currently $0.80 a piece.

With less than 10 trading days to go before options expiry, the time decay on these options is at its highest now.

Going to enter an iron butterfly spread with strikes at 27.5 – 30 – 32.5

Wish me luck!!