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.
Thursday, April 29, 2010
April 29 - Live to Die Another Day
6:30am
wake up, the sun is still down, some rays are trying to break thru
6:35am
reach for the laptop, turning it on seems like it took forever
6:37am
www.finance.yahoo.com .... ticker: BIDU
6:37:30am
FUCK! pre-market has started BIDU is up $98.12 from last close (a whopping 15%)!
Spend some time reading the news releases (I had listened to their call last night- stellar results)
Everything surprised The Street..... and why shouldn't it, they're a bunch of MORONS
Just a day before the earnings Credit Suisse had downgraded the stock setting everyone up for a fantastic surprise!
7:00am
The Alarm goes off! I hate hearing that sound after I'm already awake!
7:20am
Go to the desk and bring up the trading account! I'm not gonna like what I see!!!
Half wishing I wouldn't see the RED, half expecting that I would!
....NEGATIVE EXCESS LIQUIDITY! ........ in English, "Hey you, I see you like under-estimating risk, we don't like taking on your risk for you.... put in more money!"
8:00am
Call brokerage. Thank God for another human being on the other side, not an automated "If you would like to wait another 500 minutes, Press 1"....
Guy tells me money has to be wired before 9:30am.
8:15am
Call Bank. Thank God for 24/7 service!
"Sorry sir, we can't do a wire over the telephone," says some mellow dude, "You have to go into a branch!"
"I see a branch across the street, at XXX Yonge street! Can I go there?" I say, thinking problems are almost solved.
"Sure, it opens at 9:30!".......... Great!!!! I will be six feet under by then!
8:30am
Send my account manager an urgent email.... No Response....
Call her desk repeatedly..... HURRA.... She picks up!
Explain the situation, Initiate the transfer by email.
8:50am
Call brokerage. "Money is underway!"
Brokerage, "We don't have it, send a confirmation by fax!" .......... WHO STILL USES FAX?
9:00am
Email account manager..... "I need a confirmation emailed to me, I need to send it to the brokerage"
9:20am
Still no response.
Call her repeatedly!
She picks up!....... "We're almost done!"
9:28am
Money still not in the account!
"We're almost done!"
9:29am
"OK!"
9:29:30am
Send confirmation to Brokerage.
9:29:59am
FUNDS ARE IN!
..... take first breath since 8am!
9:30am
Off to the races, BIDU opens high, Options are bid up...... expected!
After 10 minutes, prices are stable again, and liquidity is restored!
LESSONS LEARNED...... coming soon!
wake up, the sun is still down, some rays are trying to break thru
6:35am
reach for the laptop, turning it on seems like it took forever
6:37am
www.finance.yahoo.com .... ticker: BIDU
6:37:30am
FUCK! pre-market has started BIDU is up $98.12 from last close (a whopping 15%)!
Spend some time reading the news releases (I had listened to their call last night- stellar results)
Everything surprised The Street..... and why shouldn't it, they're a bunch of MORONS
Just a day before the earnings Credit Suisse had downgraded the stock setting everyone up for a fantastic surprise!
7:00am
The Alarm goes off! I hate hearing that sound after I'm already awake!
7:20am
Go to the desk and bring up the trading account! I'm not gonna like what I see!!!
Half wishing I wouldn't see the RED, half expecting that I would!
....NEGATIVE EXCESS LIQUIDITY! ........ in English, "Hey you, I see you like under-estimating risk, we don't like taking on your risk for you.... put in more money!"
8:00am
Call brokerage. Thank God for another human being on the other side, not an automated "If you would like to wait another 500 minutes, Press 1"....
Guy tells me money has to be wired before 9:30am.
8:15am
Call Bank. Thank God for 24/7 service!
"Sorry sir, we can't do a wire over the telephone," says some mellow dude, "You have to go into a branch!"
"I see a branch across the street, at XXX Yonge street! Can I go there?" I say, thinking problems are almost solved.
"Sure, it opens at 9:30!".......... Great!!!! I will be six feet under by then!
8:30am
Send my account manager an urgent email.... No Response....
Call her desk repeatedly..... HURRA.... She picks up!
Explain the situation, Initiate the transfer by email.
8:50am
Call brokerage. "Money is underway!"
Brokerage, "We don't have it, send a confirmation by fax!" .......... WHO STILL USES FAX?
9:00am
Email account manager..... "I need a confirmation emailed to me, I need to send it to the brokerage"
9:20am
Still no response.
Call her repeatedly!
She picks up!....... "We're almost done!"
9:28am
Money still not in the account!
"We're almost done!"
9:29am
"OK!"
9:29:30am
Send confirmation to Brokerage.
9:29:59am
FUNDS ARE IN!
..... take first breath since 8am!
9:30am
Off to the races, BIDU opens high, Options are bid up...... expected!
After 10 minutes, prices are stable again, and liquidity is restored!
LESSONS LEARNED...... coming soon!
April 29 - To the edge of oblivion and back
What a mess! If BIDU posted any better results I would bet they were faking! Everything was stellar... they beat on EVERYTHING!
Yesterday was dooms day as I anticipated what the $90/share jump in their prices will do to my account this morning. I was right, sure enough this morning the big bad red sign on my account told me that if I don't post collateral the account will be liquidated!
How can I allow them to liquidate the BIDU positions when they are still $90 out of the money!!!! After a hectic morning, the funds were wired from my bank to the account to cover the margin!
As I suspected the option prices had been bid up to about $15 this morning! With the extra liquidity now I am ready to manage these positions without some brokerage selling everything to cover their own ass!
I will post more as we go.... stay tuned!
Yesterday was dooms day as I anticipated what the $90/share jump in their prices will do to my account this morning. I was right, sure enough this morning the big bad red sign on my account told me that if I don't post collateral the account will be liquidated!
How can I allow them to liquidate the BIDU positions when they are still $90 out of the money!!!! After a hectic morning, the funds were wired from my bank to the account to cover the margin!
As I suspected the option prices had been bid up to about $15 this morning! With the extra liquidity now I am ready to manage these positions without some brokerage selling everything to cover their own ass!
I will post more as we go.... stay tuned!
Wednesday, April 28, 2010
April 28 - BIDU follow up
BIDU reported stellar results..... Credit Suisse, I would love to know what you're traders were up to yesterday when you downgraded the stock!!!!
Stock is up to $710 in after-market trading and according to my option modeller, this increases the prices of the calls I'm short to $15 a piece - increasing my required margin for holding these to unpredicted levels.
I will look to pre-market tomorrow to see if I should liquidate these and take a loss or if I can ride it out.
Stock is up to $710 in after-market trading and according to my option modeller, this increases the prices of the calls I'm short to $15 a piece - increasing my required margin for holding these to unpredicted levels.
I will look to pre-market tomorrow to see if I should liquidate these and take a loss or if I can ride it out.
Tuesday, April 27, 2010
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
.
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
.
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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.