Wang’s Happy Trading

Yesterday, in our Trading Room, while trading locking in profits on puts (short-side plays), I said,

January 12, 2010 9:54 AM
market
they’ll likely position on the upside starting tomorrow and on Thursday for INTC’s earnings…

Sure enough, after the initial "morning sickness", the market rallied back!  We cashed out our puts and started looking for long-side plays:
January 13, 2010 7:59 AM
market
some buyers coming in… out of puts for now, just being careful…

We quickly closed our puts on PCLN and POT for small gains:
January 13, 2010
07:51 | HappyTrading PCLN ($210.50) Sold to Close PNENB Feb 210 puts, at $12.40 +9%
07:50 | HappyTrading POT ($116.70) Sold to Close PYPMD Jan 120 puts, at $4.00 +8%

These were opened yesterday:
January 12, 2010
12:36 | HappyTrading POT ($117.30) Bought to Open PYPMD Jan 120 puts, at $3.70
08:49 | HappyTrading PCLN ($212.90) Bought to Open PNENB Feb 210 puts, at $11.40

The POT Jan 120 puts closed at $2.71 and PCLN Feb 210 puts closed at $10.5.  These puts plays are in addition to the quick gains that we made yesterday on BIDU and FAS puts.  We correctly anticipated and identified the market turns, and profitted on both sides! 

Yesterday, we played BIDU puts in the Trading Room; today, we were playing "calls".  BIDU jumped above $413 in after-hours yesterday on the news that Google (GOOG) might pull its operations out of China.  BIDU opened this morning at $442.71 and started to see some profit-taking.  I alerted our members to be careful as BIDU pulled back, and that $430 was a support:

January 13, 2010 7:07 AM
BIDU
tested all-time high… be a little careful chasing this… $430 has some support…

When BIDU came tested $430 and held the support, it was time to buy.  Here’s a 5-day, 15-minute chart for BIDU:

We can see the resistance at $440, which the bulls tried to get above by opening at $442.71.  The all-time high for BIDU is $443.25, and, it could not get above that today.  BIDU fell back to test $430, but, found support there.

I picked up BIDU Jan 420 calls at $13.3 and cashed them out at $19 only 2 hours later, for a +43% gain or $5.7/contract:

BIDU tested $440 again at 1:30pm, but, still could not break through.  It came down to the 10-MA, which was my signal to get out.  Normally, I would hold these a bit longer, but, since there are only 2 trading days left in these Jan options, I’m very careful.  BIDU, then, came down to 20-MA and found support at around $435.  It went back up.  Since $440 was the resistance, I knew there was a chance for me to do another quick play within this $5 range.  So, I entered a 2nd trade with BIDU Jan 430 calls.  I got in at $11.8 and got out at $13 in about 30 minutes for a quick +10% gain:

The reason why I moved up a strike was because
1) BIDU now is above $430, at $435
2) I already pocketed profits on the $420s and want to risk less.  The $430 calls were cheaper and with BIDU at above $435, these calls will move just about as fast as the $420s.

So, I was risking less money to get about the same results.  Today, the BIDU Jan 420 calls closed at $21; and, the 430 calls closed at $12.8.  If I had held on to the 420 calls, I would have made $2 more, but, I’d risking $19/contract.  On the other hand, I made another $1.2 on the 430 calls, but, I decreased my risk to only $11.8/contract.  The reward/risk ratio was in my favor playing the 430 calls on the 2nd entry.

The market can be volatile, especially during the expiration week.  Try not to get stuck in your opinions or logic.  If you stay nimble and allow the trades to come to you, you can often find profits on both sides! 

Good night and HappyTrading! ™