Well the latest trade was one for the books... I've never really appreciated the famous quote that "the markets can remain irrational far longer than a trader can remain liquid!"
I experienced this first hand with my short position in BIDU call options. Everything pointed to a ridiculous up trend that could not continue, however, it did for far longer than I expected only to break down after a major margin call essentially forcing me to cover my short positions.
This burns a little but life goes on. I will stop short term trading for a period of time to make sure I am not trapped in the "gambler" mentality. This is when a gambler will try to recover losses in the next bets and usually ends up betting larger and riskier than before and eventually busts!
Process is important here and I have to keep a clear head to make sure my other positions don't suffer. So I may not post trades on here as often, because I am not making any trades. However, as I read more about behavioural investing, with every page I learn more about the role of personal and market psychology on trading and investing as a whole.
I will continue to post on what I learn and what I think will be most significant.
Sunday, May 23, 2010
Thursday, May 6, 2010
May 6 - BIDU Follow up
A quick update on BIDU, after the massive gap up following the earnings call, the stock has come down a little and stabilized. However, after a decrease in implied volatility, it has jumped again as more uncertainties loom in the near future.
China is tightening its fiscal policy to cool the housing market and prevent a bubble, this will in the long-run cool down the Chinese stock market, but my trade is very near-term and this doesn't effect me much - although its not completely irrelevant.
Note worth is also how Jim Cramer is pushing BIDU at these levels. He obviously knows of the impact he has on the retail investors and with the 10-for-1 split in BIDU stock coming up on May 12th, he is looking to push this on retail investors and now it looks cheaper to own the stock.
A stock split doesn't change anything about the underlying, it just divides the current BIDU pie into more slices. BUT the majority of the time, a split has a rallying effect on the stock right after the split, this may push up the stock closer to my short call strike price of $800... which will be $80/share after split!!!
I'm watching this stock closely and following it day by day.
More posts to come.
China is tightening its fiscal policy to cool the housing market and prevent a bubble, this will in the long-run cool down the Chinese stock market, but my trade is very near-term and this doesn't effect me much - although its not completely irrelevant.
Note worth is also how Jim Cramer is pushing BIDU at these levels. He obviously knows of the impact he has on the retail investors and with the 10-for-1 split in BIDU stock coming up on May 12th, he is looking to push this on retail investors and now it looks cheaper to own the stock.
A stock split doesn't change anything about the underlying, it just divides the current BIDU pie into more slices. BUT the majority of the time, a split has a rallying effect on the stock right after the split, this may push up the stock closer to my short call strike price of $800... which will be $80/share after split!!!
I'm watching this stock closely and following it day by day.
More posts to come.
Saturday, May 1, 2010
May 1 - More Fall Out From Credit Suisse's Moronic Move
Hi all, in the past couple of trading days I've been doing some more research and can't help but find collective outrage at the stupidity of Wallace Cheung, the analyst at Credit Suisse, who downgraded BIDU to "underperform" a day before stellar earnings.
From Motley Fool, in a article titled, "This week's 5 Dumbest Moves":
On a lighter note, BIDU was down $21 on Friday trading bringing the price to $689, and the price of the 800 JUN calls hovering around $8/share ....... about a $4/share paper loss for me. BUT I intend to hold the position.
From Motley Fool, in a article titled, "This week's 5 Dumbest Moves":
This week's bonehead analyst move goes to Credit Suisse's Wallace Cheung, who downgraded Baidu (Nasdaq: BIDU) shares on Monday, just two days before China's leading search engine was scheduled to post its quarterly financials.In response to the article, a comment that couldn't express my views more reads:Why would an analyst come down on a company with improving fundamentals, after it had obliterated Wall Street's profit targets in each of the three previous quarters?
Furthermore, here is a line from yours truly posted on the StreetInsider.com's article on the downgrade:
I would love to know what kind of game CreditSuisse is playing, downgrading a stock a day before the earnings call.... which now in hind sight happened to be the driver of a $100 gap up the day after !!!! Either your analysts are really lost OR you had other motives!!!! Were your traders buying all along on the "downgrade" news, eh Credit Suisse?
On a lighter note, BIDU was down $21 on Friday trading bringing the price to $689, and the price of the 800 JUN calls hovering around $8/share ....... about a $4/share paper loss for me. BUT I intend to hold the position.
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Thank you for calling out Credit Suisse and Wallace Cheung for that ridiculous downgrade of Baidu. Everyone is upset with banks and want them held responsible for questionable activity, I think these analysts and research firms should be under the same scrutiny.