For Directional traders

Missed day's high again on ECA-TC, mainly because of trend reversal early morning. Sold all my calls mid-afternoon when the reversal was evident, bought 3 OCT58 puts @ $2.65 at around $58.60 underlying. Had bought 2 calls @ $3.23, sold them @ $3.60. Had bought 1 OCT60 call @ $2.65, sold @ $2.40. Reversal looking evident because of day's low being a good bit lower than previous day's low, and average price in the candle body lower also than previous day's. The last 2 reversals caught me off guard somewhat because they occured short of their normal turnaround points on the indicators. Nevertheless, they have to be dealt with as such, because everything changes pattern before too long.

GOOG sure took off today, but didn't have enough to buy into it - imagine me going through a turnaround while watching a surge like that one just out of reach!
 
Jerry,
How and why do you figure GOOG's market cap will be halved soon? That sounds pretty drastic - does the company do that voluntarily or you figuring on serious competition soon? I probably don't really understand what market cap is, anyway...

You guys keep my interest piqued with your seemingly contrarian ideas to market direction - probably better than mine - I'll be watching QQQQ and GOOG with renewed interest!
 
Quote from Rob on Business:

Jerry,
How and why do you figure GOOG's market cap will be halved soon? That sounds pretty drastic - does the company do that voluntarily or you figuring on serious competition soon? I probably don't really understand what market cap is, anyway...
More...

Rob,

that's really wishful thinking on my part versus reality and it's certainly not being reflected in the market currently.

market cap is just the value of the company and the way it's calculated is the number of outstanding shares multiplied by the current price per share. goog has about 279M shares x 309 gives it about 86B market cap. if you were to buy all of the shares, you need to have 86B in your pocket. of course, if you really wanted to buy goog, you would need to pay an additional premium to the current price of goog...

goog is valued at 1 1/2 times the value of ebay and about 135% the value of qcom. i'm not gonna compare goog to amzn, because i have a rather low opinion of amzn and goog has been profitable for a long time and is a cash-machine generator.

looking at the info on yahoo (i know i should get a better source, but it does provide enough info), goog does appear to be a "better" company than ebay and qcom. both ebay and qcom are really matured companies and they are no longer in hyper-growth as goog seems to be showing at the moment. goog's revenues, profit margin, cashflow from operations are very impressive and if you add the tremendous growth that they're showing, how can anyone think or doubt that goog will be the next microsoft.

and that's the reason why i bought long-term DOTM puts (march06 220 puts) on goog today. ebay and qcom are stable companies. they already have their established sources of income. i think if goog were to announce one quarter of missed earnings or some type of slow-down, the market will react harshly. given the way the mutual funds have a herd mentality, i think there's a potential for goog to be oversold. in addition, if the market has a prolonged downturn (say 4-6 weeks) goog can easily drift to around 250. if that happens by jan, i think i can close the position for a nice profit.

the good thing for me is that i can only lose the premium on those puts, but someone shorting goog at this level might have to go through some painful periods before it gets better.

Good Trading.
 
ECA-TC did an oddball move this a.m., by opening $0.90 high on a downtrend- never done that before. My wife told me over dinner tonight the news had said they sold their Ecuadorian assets - checked Yahoo and first report on that was at 0600 (how did I miss that?)- probably explains the unusual spike. However, I held on for the drop and drift it did, not making anything in the options over yesterday as it spent the day eating up the high open on its way down, to close only a bit lower than yesterday. Holding 4 x OCT58 puts @ $2.50 - average cost $2.58

GOOG looks like it might be good for another day before a correction - tempting to get in...
 
Jerry...
Thanks for the details - nice and clear. Still surprised at your bearish preference, especially if it's yet to be another microsoft as you suggest, but respectfully, I am watching to learn.

Happy trades to you...
 
Quote from Rob on Business:

Jerry...
Thanks for the details - nice and clear. Still surprised at your bearish preference, especially if it's yet to be another microsoft as you suggest, but respectfully, I am watching to learn.

Happy trades to you...
More...

I'm going to second his opinion about GOOG (to some extent), though I'm not going to comment on hypothetical trading scenarios (I don't have the account to dabble with something like GOOG, not yet trading options, definately don't have the capital to trade the underlying).

The thing with GOOG is that much of the current valuation is based on earnings growth (more specifically, blowing away the Street on a regular basis), just look at the P/E ratio. If GOOG drops the ball one of these quarters, I could see it reacting sharply.

That said, it's a tough stock to be clearly bearish on for one reason - it's a popular momentum stock that actually makes money.
 
Quote from Chagi:

I'm going to second his opinion about GOOG (to some extent), though I'm not going to comment on hypothetical trading scenarios (I don't have the account to dabble with something like GOOG, not yet trading options, definately don't have the capital to trade the underlying).

The thing with GOOG is that much of the current valuation is based on earnings growth (more specifically, blowing away the Street on a regular basis), just look at the P/E ratio. If GOOG drops the ball one of these quarters, I could see it reacting sharply.

That said, it's a tough stock to be clearly bearish on for one reason - it's a popular momentum stock that actually makes money.
More...

GOOG dropped the ball just last quarter and thank goodness I saw it coming, and got out early with a small loss.
Looking at YHOO numbers it's possible to have a good idea where GOOG might be going.
 
Got caught with my pants down again in public - how embarassing! ECA-TC cracked the whip while I was on the end of it and flailed me off. Stock is up while I was down. Misread everything the last 3 days. No trend reversal, just an anomaly. Closed 4 x OCT58 puts @ $1.80, bought 2 OCT60 calls @ $2.75 after stock rose higher than the last 3 days mid-morning. Near day's end, as further rise was evident and GOOG had dropped $10, sold 1 x ECA-TC OCT60 call @ $2.80, to free up some money to buy a GOOG OCT280 put @ $4.40 at market close. After hours shows GOOG dropped another $2.90. I've learned today that I should be closing any put pos'ns on dark ECA-TC candles at day's end, especially if the trend is uncertain as these last few days, as dark candles rarely gap apart and so little if any opportunities to be lost by holding overnight. If anything, dark candles can open high, ruining a held put pos'n. A $500 lesson today.

I understand you guys' bearish concern on GOOG - because of a sensitive and inflated P/E. Any doubt on earnings would burst the bubble. Believe me, I'll be vigilant.
 
Quote from Rob on Business:

Got caught with my pants down again in public - how embarassing! ECA-TC cracked the whip while I was on the end of it and flailed me off. Stock is up while I was down. Misread everything the last 3 days. No trend reversal, just an anomaly. Closed 4 x OCT58 puts @ $1.80, bought 2 OCT60 calls @ $2.75 after stock rose higher than the last 3 days mid-morning. Near day's end, as further rise was evident and GOOG had dropped $10, sold 1 x ECA-TC OCT60 call @ $2.80, to free up some money to buy a GOOG OCT280 put @ $4.40 at market close. After hours shows GOOG dropped another $2.90. I've learned today that I should be closing any put pos'ns on dark ECA-TC candles at day's end, especially if the trend is uncertain as these last few days, as dark candles rarely gap apart and so little if any opportunities to be lost by holding overnight. If anything, dark candles can open high, ruining a held put pos'n. A $500 lesson today.

I understand you guys' bearish concern on GOOG - because of a sensitive and inflated P/E. Any doubt on earnings would burst the bubble. Believe me, I'll be vigilant.
More...

hi Rob, sorry to hear about the "hiccups" you've had with ECA-TC. it's really difficult to be right both ways, but i do understand where you're coming from. i've been there when i can clearly see in my head the directions of the underlying. and many times i was right, but the times that i was wrong, i held on too long and hurt my account pretty bad. at least you're able to move on and continue with your plans...

re: goog - i have several reasons on why i put on the put-position:

1. (and 2 are correlated) "hedge" against my call-positions - although i was sort of thinking i needed to add some more because the delta on those puts were only -7 (-.07) yesterday and with only 7 contracts, i was only "synthetically" short 49 shares of goog, but my delta and number of contracts on my calls (not goog) are much higher. given today's market action, i'm not going to add anymore puts to my position as goog makes up the low delta by having "wider" moves on the underlying.
2. i'm imagining a few weeks of downturn in the markets sometime between now and january and hopefully goog will drift down to around 250 and if that happens without any real significant news on goog, i'll close the position for a nice profit
3. i'm waiting for the next couple of earnings announcement from goog that might disappoint the "market" and change the sentiment to negative. if that sentiment changes enough, i can see the hedge funds/mutual funds start to dump goog which can start a domino effect that could bring the price of goog to around 200 or lower.

your oct put on goog is much closer to the stock price than my march puts. i wish you the best on it. it could work out for you (and hopefully me :) ) if their earnings announcement is not so good on 10/20/05. expiration is 10/21, so your put will not expire before the EA. it would be a nice bonus if they warn on earnings which is usually 2 weeks or more before the actual EA.

Good Trading.
 
Thanks Jerry,
For the battle plan details. I'm really looking like a fool these days - got stopped out on both my ECA-TC call and MY GOOG put today - thankfully I didn't lose beyond the initial outlay, just the nice intraday premium build-up. I didn't clue in that the slight gap up on ECA-TC overnight would translate into a dark candle on an uptrend, so I missed closing out on day's high just before work this a.m. I was so surprised at day's end, I hadn't clued in yet what was happening and stayed flat for overnight which I later realized was a big mistake as it dawned on me what had happened. That was confirmed when I checked after hours and noticed ECA (US) was up $0.76 - and me with no overnight calls at the now much cheaper price than at day's open today.

GOOG finished high on a downtrend and again, I didn't close my profits when I should have because I haven't been following GOOG's style and am rusty on reading it. History shows, as with ECA-TC, that gap downs on downtrends usually result in a clear candle, or high close. GOOG opened down about $3 today, and I was just glad for the overnight profit, not mindful of the impending intraday rise. I'm going to bet on some down movement for 1 more day, bought another put at close.
Maybe I should be drinking my coffee 1/2 hour before open instead of 10 minutes!

ECA-TC OCT60 puts x 1 stopped out @ $2.70
GOOG OCT280 put x 1 stopped out @ $4.40
Bought 1 GOOG OCT290 put @ $7.75
 
You must log in or register to reply here.
Back
Top