I brought and closed the 2 Baidu September put contract I was holding. I net about $400 hundred on that deal. I didn’t wait for it to expire because that was quite a return given the small amount of investment ($600) in a short period of time. I feel there may be chance for me to sell put again at a good price before the option expiration day. It is the third time I make money on trading options. Baidu’s September put options pain was raised again at $320 currently. Looks like traders are not as bearish on Baidu as they were at the end of last month.
account balance 2009/09/05
My account balance is still short of my initial investment amount. But I am not eager to earn it back. I will just take it slowly. I feel comfortable with what I am holding and I think the day I recover my initial investment amount is not far. My focus recently is to get back to work. I really feel it is not easy to get a job nowadays. I feel the companies that are looking for people are pickier and they take it slowly. With 9.7% unemployment rate the companies that are hiring are sure to have a lot more choices than before.
I am not convinced that the recession is ended. I believe the problems of the banks are not over yet. I kind of think that the real estate market is better only because of the government’s incentive for first time buyers. Retail sales didn’t have major improvement. Further more I believe foreclosure will continue to raise as more option ARM reset occurs. I am maintaining a major portion of cash in my portfolio and waiting for opportunity.
I mentioned in my previous post that Baidu’s September option pain was $300. I checked it again and the option pain was higher a little bit at $310 at the moment. What 
would be your guess if you predict Baidu’s price movement without looking at the option pain a couple weeks ago when Baidu was about $340? I would probably think it would go up instead of retreating. Obviously option pain can really tell something. It can tell how institutional traders see a particular stock. If option volume on an issue is large enough option pain on that issue may be able to tell how institutional traders see the market overall.
I checked INTC and BAC September and October option pain. They are trending downward. They seem to tell the bearish sentiment of the market should be extended into October. However Baidu’s Oct option pain is at $330 which is higher than September’s. I am not sure if you agree or not but I have already convinced that option pain is a very good leading indicator on the underlined issue or even the overall market.
Anyway I didn’t trade for a while. I was busy looking for a new job. I add 200 shares of CSKI at $13.09 and I sold 2 contract of Baidu Sep 290 Put at $3. I was thinking if Oct Baidu option pain is $330 I wouldn’t mind to have it at $290 in the mid of September. There is $20 difference or about 9% difference between $290 and Sep option pain. I thought it could be safe. But again who knows. We will see how it goes.
My Baidu put option went well finally. 
I collected the $420 option premium. In my previous post I mentioned I sold a contact of Baidu Aug 320 Put. The market took a deep a few days ago. I thought the put would end up in the money and I would be forced to buy Baidu at $320. I didn’t mind if that happen though. But magically on expiration day which was the passed Friday Baidu closed at $344, a price very closed to its option pain. Seems to me the option pain theory has some credibility. It is the second time I sold put and it is the second time I saw stock price closed near option pain on expiration day. Baidu’s September option pain is $300. Does that mean institution traders are bearish on Baidu? I really want to fine out next month.
I believe CSKI is under value and I did some research on the stock to find out what was holding back this company. I found there was a so called professional short seller spreading news that he had reason to believe CSKI management was providing incorrect financial information. He even has a web site to tell his story http://waldomushman.com/. I don’t know whether I should believe this rumor. Maybe the short seller used to be a potential investor on CSKI but got opt out and felt pissed off. That is wild a guess and I hope that is the case. CSKI has to proof to all investor that the short seller is wrong. I feel there is a war between CSKI’s management and the professional short seller. I am still holding CSKI and of course I hope CSKI management will win the war at the end.
I haven’t update the stock traders blog for a while because I was busy. I took a look today and I found someone name CAP posted some really harsh comments. I deleted most of them. Sorry about that CAP! I hope it is not because CAP 
followed some of my trades and lost money on them. The information on my blog can not serve as investment or trading advice by any means.
I was wrong on many of my trading positions taken lately. Especially the put position on Baidu. I sold one contract of Baidu Put and I am still holding it. As I mentioned before Baidu likes to follow its home market, the Chinese stock market. At this time PST 1:47 AM 2008-08-19 the Chinese stock market dropped some 5%. Seems to me the US market will be ugly when it open later today. In fact US future already dropped almost 100 points. If Baidu drop 5% today it will be below $320, the strike price of my Puts. There is a very high chance that I will lost money on the Puts. I will know this weekend. I added another stock to my portfolio though. That is Monlia Healthcare(MOH). I bought it at $19.95, 100 shares. And I am losing money on that again. CAP said I almost lost money on every trades and can’t believe I am holding an MBA. That’s almost true.
Indeed I wasted a lot money getting my MBA. If I didn’t take it I would have saved a lot of tuition. If I didn’t take it I wouldn’t trade stocks and I wouldn’t lost $70K. Do I regret taking it? I don’t think so. I might have gain something not in monetary terms while I lost this money. At least I felt OK that I still survive after this kind of lost.
Once a while I have this crazy thoughts. I did not have too much crazy act though. Evey time I act crazy I got burned. I mentioned I ever short 3000 
shares of Well Fargo using margin capital almost 2 times of what I had in my account. Today I had a crazy thought again. I thought about using all the cash in my account selling Baidu August 320 Put. I really don’t think that Baidu will go back to $320 a share by August 22nd. If it does I believe it will create a buying opportunity. That is why I want to sell Baidu August 320 Put. At the end I only sold 1 contract for $420. I ever mentioned that selling put is a strategy to earning more than CDs rates if you have cash sitting idl. I still believe so. But we’ve got to be very careful picking the stock and option strike price when doing that.
After I sold Baidu put I saw my account requires me to remain $6,374 of cash. So if I want to be all in the maximum number of contract I can sell is 4 only. 4*420 = $1680. So if everything works out the all in strategy can net me $1680 by August 22nd. It looks like Baidu is not going back to $320 given the current market sentiment. But my experience told me it is very hard to predict. Market sentiment can have 180 degree change over night triggered by a single story. So I dare not to be all in. Anyhow I am holding two positions now. 500 shares of Fig (Fortrest investment group) and 1 contract of short Baid Put. The picture shows my balance.
As to Fortrest investment group. I feel it will reach 6 if the market remain positive. Blackstone drop a lot today and it seem to me it will go up tomorrow and so will Fortrest investment group. let’s see what happen tomorrow.
Yesterday I thought about shorting Baidu at $318. I am glad I didn’t do so. Baidu is holding up above that price and didn’t follow Google dropping. I guess traders are waiting for its earning report on Jul 23rd.
I traded again today I was tire of watching. And I lost again. I short Bank of America at $13.30. It went up to $13.47 after that. I covered it when it fell back to $13.33. It kept falling after I covered it. I shorted it because its earning was not a good one basically. It reported profit only because the big gain on selling stake in China Construction Bank. The gain was more than 5 billions instead of 2 billions that I guessed in this post “Bank of America Earning Forecast and Financial Statement Analysis”. If the gain was 2 billions then Bank of America will show 1 billion lost as I was expecting.
Seems to me Bank of America will report no profit or will report loss for the coming quarters. I kind of think Bank of America will keep falling starting from here. But again I don’t trust my judgment.
Here is the trade today and balance.
 Transaction 2009/07/17 |
 Account Balance 2009/07/17 |
Account Balance Changes: -$50.33
After I post the question Should I Short Baidu at $318 on yahoo stock board I got an advice on the board that I think is an honest opinion and worth to think about. It is from a trader with screen name jlin303. I wish the answer can be post on this bog so I quote the advice here. And once again I am grateful for the advice.
Well, I certainly wish you the best of luck. Just one last piece of advice.. I’m sure there are day traders here who make money by day trading their instincts and feelings but I, for one, am a system trader. I’ve spent many hours researching various technical and fundamental indicators, programmed a system, and then spent many more hours back testing and refining the system until I felt comfortable with the win rate, draw downs, and many other factors. I use a Kelly Criterion approach to size my trades and it’s been working well for me.
Here’s the thing: after reading through your blog, I don’t think you can honestly say you’re a long-term winning trader, in part because you’ve lost so much, and also partially because you just don’t have a long enough history to say confidently that it’s not because of variance. I suggest you look long and hard at a systematic way to trade, whether it’s through automation or manual trading. You need very specific (and proven) sets of rules and then you need to stick to them. Asking people on the boards is not the ticket. “I want to short BIDU because I FEEL it’s gone up too much” isn’t a specific proven set of rules. If you put on this trade, do you know what your chances of making money and losing money is? How much should you risk (stop-loss)? What is your exit strategy if you make money? etc.
My answer would be something like “I’m shorting BIDU because the price fell below the 5-day and 10-day EMA today on heavy volume. My research has shown that in the last 5 years, when this has happened, it goes down 10% on average about 70% of the time and it goes up 3% and average of 30% of the time. My bankroll is XXX so based on the Kelly Criterion, I’ll risk YYYY to make ZZZZ dollars. Once the price crosses the 5-day average again (moving up), I’ll be out the trade. I expect to make TTTT amount of money in the long run by putting on this trade, based on historical results.”
You seem very genuine in your quest for knowledge so I broke my silence to talk to you. Usually, I would just browse the boards for a light chuckle at those pumpers and bashers who make ridiculous farcical comments and then try to substantiate their positions by making outlandish claims about the size of their trading accounts and how much they’ve made.
This is my last post on the subject so good luck and never stop learning.
I thought about a few trades yesterday and today but as I said in my previous post I lost confidence about my judgment lately so I didn’t make the moves. It turned out that if I made the move I would make good profit. I thought about shorting 2000 shares of Bank of America yesterday after market close at $13.40 but I didn’t do it. I thought about buying 2000 shares of BAC this morning when it dropped to 13.04 a couple times but I didn’t do it.
Now I am thinking about shorting 100 shares of Baidu at $318. As you see Google dropped $14 dollars after market close. It is like selling on the earning report. Baidu usually follow Google or the Chinese market. So I kind of think Baidu will drop and will drop $10 at some point tomorrow. I am still thinking about the move. I will have the chance to short it till 5:00PM
I post the same question on Baidu board. http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_B/threadview?m=tm&bn=22855&tid=273994&mid=273994&tof=6&frt=2. Seems like no one really have the same feel. I let go that thought again.,
Like I felt yesterday Intel’s result dragged up the market. I lost on the Baidu put and I sold them. I traded on GCI (GANNETT CO INC) today. I noticed this stock in my trading tool’s news window. I felt this company was kind of under valued even at today’s closing price but I didn’t follow this company for long. It reported 2nd quarter profit of $0.46 a share and its stock price was at $4.50 at close. Its forward P/E is quite low. I have no confidence on my own judgment any more so I am not going to keep it. I feel I just need a break. After more than a month of hard work I am still at loss. So I may not be trading for the rest of the week.
 Transaction 2009/07/15 |
 Account Balance 2009/07/15 |
Account Balance Changes: -$260.59
I covered my short position on Bank of America and brought some Baidu Jul 290 puts. I felt I took the wrong side. I felt the market turn bullish after Intel report better than expected earning. Technology stocks may go up tomorrow and so will Baidu. Baidu likes to follow Google or the Chinese stock market as far as my observation goes. Looks like it is not going to go down either way. Google will report earning on 16th. My put option will expire on 17th. Looks like the chance I make profit on this put is low.
 Tansaction 2009/07/14 |
 Account Balance 2009/07/14 |
Account Balance Changes: +$18.72
