Friday, October 23, 2009

BAGAKOAA October 23, 2009 End of the day


October 23, 2009 End of the day

Wow. What happened? I got hit for more than a full point today. Ouch! I did not get stopped out of anything but have come close on a couple of holdings.

CHU, China’s 2nd largest cell provider (BTW China broke 500 million cell users this week) is down 4.6% since I got in. It intrigues me as to why. The start selling the iPhone next week, they just got 1 Billion from Spain’s largest phone company, Baidu, China’s answer to EBAY just announced a cell phone app exclusive to CHU. This baby has to pop soon. I am going to screen the financials again and probably increase my vast holdings on Monday. It is my 5th largest holding and about 4.6% of my primary portfolio.

I just added to GILD and it is down 4.3% since my entry. I am still liking this stock. Cramer reassured this in the Lightining Round Skee Daddy last night. It is my 8th largest holding at about 3% of my total.

It is sad that all the positive earning reports got ignored today. Except for a couple of winners today, MSFT and AMZN, everything else was down. The dollar tightened up a bit today which made commodities and materials soften. I got wacked pretty good on RIG and CVX. A mixed housing report did not help either.

I hope everyone is protecting their gains with stops.

In an earlier note I indicated that I was almost done with Cramer’s new Book getting Back to Even. I did not give it a strong recommendation. After the most emotional baseball game I ever attended (Go Angels), I got home about 9:30 pm and realized I had intentionally skipped over a couple of chapters about options.

You see I got burned on some options late last year and earlier this year. Well I lost about 4% of the monies I had played in call options. That is why I skipped the chapter. Last night I glanced at the chapter and I swear, Cramer explained the mistakes he first made playing the call option market way back when dinosaurs roamed the earth. It was exactly what I had done back late last year and earlier this year. He does a great job of explaining, in very simple terms all the stupid stuff I did in November through February.

I was buying “out of the money” call options because they were cheaper that at or “in the money” options and in the declining market of Nov-Mar, while my losses were minimized because they were options, they were losses. His book explains the benefits of paying more, to buy options that are in the money.

Here is a brief explanation. I was buying an option to buy 100 shares (One option) of abc stock, currently selling for $10.00 a share 3 months from now at a price of $12.00 for about $2.00. That means for 200 dollars I was controlling the 1000.00 worth of abc stock between now and 30 days from now. If the stock stayed at 10.00 I lost the 2 dollars per share, if it hit 12 dollars I broke even, and if it went to 14, I made 2.00 a share.

Obviously in the Nov-Mar time frame this did not work out to well. What I could have done is buy and in the money option, which means buy abc stock with a future strike price of $8.00 and it would have cost me a bit more than 2.00 a share to control abc. If the stock stayed at 10.00 I would be out 200 bucks if it went down to 8.00 I would be out two hundred bucks but if it went to 12, I would be up 200 bucks. I am over simplifying, but Cramer does a great job of explaining this.

If you want to play along with out spending anything, I just bought 8 call options for EBAY with a Jan 10, 2010 strike price of 15.00 for 8.38 each. EBAY closed down today at 23.56. So in order for me to break even, Ebay has to get to 23.38. So I am already in the money, (assuming my limit order takes Monday). So for 6,700 bucks I am controlling 18,848 dollars of EBAY. So let’s see what happens.

Again, I would get Real Money and then GBtE. Good books.

Everyone have a great weekend. After a crummy day like today, I am going home to a cheap single malt (an oxymoron if I heard of one) and be kickin the dog and lookin at next weeks earnings schedule. Got to find a winner.

Salve Lucrum


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