Phew! What a busy couple days. Firstly, let me get you guys caught up on all my recent trades:
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7/14/09
Bought 5 CITGZ CIT July 2.5 Calls at $10: $50
Bought 5 CITSI CIT July 1 Puts at $10: $50
That left me holding 10 of the July 2.5 Calls and 15 of the July 1 Puts. Average price paid for the Calls was $7.5 and $13.33 for the Puts.
7/15/09
Bought 3 FAYSP FAZ July 42 Puts at $135: $405
Bought 5 IBNGF ICICI July 30 Calls at $50: $250
Both positions are naked. Fun times.
7/16/09
Bought 1 GOPGL GOOG July 460 Call at $195
Bought 1 GOPSB GOOG July 410 Put at $195
Sold 15 CITSI CIT July 1 Puts at $65: $975
So, here a break down of the CIT trade:
Bought 15 CITSI CIT July 1 Puts at $13.33: $200
Sold 15 CITSI CIT July 1 Puts at $65: $975
Total profit on Puts: $775
Minus cost of Calls: $75
Total Profit: $700
Percent Gain on Trade: 231%
Percent gain of portfolio: 33.4%
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CIT was denied more government aid - the shares were halted towards the end of trading yesterday. The shares reopened this morning down 75% making my puts worth 400% more than what I paid for them. CIT is now scrambling to get private money in order to stay in business. In any case, it was a great trade.
Bank of America reports results tomorrow morning. If they beat estimates - which they should - and their credit losses have flatten, we should see a strong rally tomorrow. If that happens my puts on the FAZ, which are already in the money, should gain a decent amount. Looking for an exit within the first 30 minutes of market open. I’m not playing around on expiration day, which is tomorrow.
If we do see a rally tomorrow, IBN should surpass $30 a share, which would mean my calls would be in the money. Looking for an exit from this position early tomorrow also. I’m very skeptical about this being profitable, simply because the stock was left behind today when the market was rallying.
And now for, what I think, is the biggest mistake I have made so far: the strangle on GOOG. I was expecting them to blow past estimates and the stocks to rally about 10% after they reported earnings (they reported today after market close). They reported a measly 3% rise in revenue and a 19% rise in net income. They also reported a drop in revenue per click - the amount they’re paid every time someone on the web clicks on one of their ads. The slowing revenue growth and drop in price per clicks spooked investors. Unfortunately, it didn’t spook them enough. The stock is down a little more than 3% after-hours. For you long term investors, now is not the time to invest in GOOG.
In any case, there still a chance the puts will hit. The earnings growth was good but the revenue growth is scary - especially for stock trading with a P/E in the low 30’s. It makes me question if GOOG is a growth company anymore. The stock should sell off in the longer term, there’s no reason to buy this.
Tomorrow will be another action packed day. It’s options expiration plus we have Bank of America reporting earnings before market opens. I’m hoping for a rally off the banks earnings but just one wrong word from them and we’re heading straight down.
Hope you guys are having a great week!
-Nik