April 27 - Interesting action by Credit Suisse (BIDU)

This morning BIDU was downgraded by Credit Suisse from 'Neutral' to 'Underperform'. Traders responded by selling, and the stock price currently stands at $628, down about 2% on the day.

This downgrade comes at a very interesting time - right before the earnings call tomorrow. Do they know something?? Assuming they do know exactly what's going to happen on tomorrow's call... are they downgrading to depress prices so their traders can buy before the prices jump tomorrow?? OR are they trying to get ahead a disappointing call for an "I told you so" kinda thing??

As for my position, the JUN 800 calls are trading at $2.20, which gives me about $1.80/share of paper gains. Realistically these calls should be trading a lot lower than $2.20 given that they expire in less than 8 weeks and they are still $170 (27%) out of the money, BUT the implied volatility associated with the earnings call coming up tomorrow is keeping option prices inflated.

Once the earnings call is over, the volatility will decrease and prices will come down (given that the stock price doesn't jump up huge). I will be watching this closely.


Now it's just a waiting game until tomorrow's call after market closes
.