Archive for the ‘Trading’ Category

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!

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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.

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!!

I love Dreamworks Animations!

November 2, 2006

Gotta celebrate today! Dreamworks shares rose more than 10% to $28.31 after announcing surprise earnings.

My NOV 25 call options rose from $1.2 to $3.2, bagging a 167% return on my investment! Time to buy some Dreamwork DVDs! 🙂

Next quarter’s earnings should be good too, with Flushed Away and Over the Hedge DVD sales to boost earnings.

Part of the reason why I think Dreamworks earnings will continue to grow is because I came across some Madagascar DVDs speaking cantonese and I thought to myself “Wow… the beauty of animations is that it can be translated to any language easily, so the potential to sell their animated flicks to the entire world is enormous! You can easily translate them to indian, arabic..etc”

MEMC (NYSE:WFR) buying opportunity?

October 30, 2006

MEMC is a strong company in a strong industry but suffered a 15% drop on earnings release last week. If it drops to $30, I am going to buy all I can.

If it sticks around $35 for a few days, please remind me to buy a 35/40 bull call spread again 😛

If you wonder why I love bull call spreads, I guess its because I only research stocks which I think are strong companies with strong growth potential and so I am usually bullish on stocks I cover in my blog. And why spreads? Spreads are cheaper to buy and I love to buy cheap stuffs. Haha.. actually, its just that I can’t bear to fork out $3500 for 100 shares of MEMC but spreads allow me to pay just over $200 for the same amount of shares. Leverage is such a cool thing.

Akamai to $50 again!

October 30, 2006

Shares of Akamai were hit hard when they beat estimates and upped guidance for 2007 during the earnings call last Friday.

Guess its time to buy my favorite bull call spread again. The DEC 45/50 bull call spread certainly looks attractive now. Akamai can never stay in one spot for too long and should hit 50 again in no time soon.

TIVO – It’s now or never!

October 28, 2006

As the end of 2006 draws nears, the time has come for whether TIVO will ever make it big. Internet broadband video and movies on demand are currently hotter than they’ve ever been with Google gobbling up YouTube, it seems like a company like TIVO should be going somewhere.

With the Comcast rollout coming soon, I have picked up some $7.50 FEB 07 options as a gamble. If this stock doesn’t go anywhere by then, its time to say goodbye to TIVO forever! Been longish on TIVO for over 3 years now… been very patient already 😛