Saturday, March 24, 2007

A Winning Trade - Goldman Sachs Group Inc. (GS)

Dear fellow options traders :


This week the investors' focus was on the Federal Reserve Meeting, held over 2 days on 20 & 21 Mar 2007.

As expected, on Wednesday, 21 Mar 2007, the Fed voted unanimously to keep its benchmark federal funds rate (a key overnight bank lending rate) unchanged at 5.25 percent but maintained a warning on the risk of inflation. The stock market rallied after the Federal Reserve signaled that the central bank's next move might be a cut in the interest rates.

Goldman Sachs Group Inc. (GS) reported good earnings on 13 March 2007 and gapped about +$2.00 to $204.96. I expected this stock to rally if the Federal Reserve policy makers held rates steady coupled with an optimistic statement of the economy. Thus, I paper traded by purchasing 2 contracts of the Goldman Sachs Group Inc. (GS) Apr 210 Call for $360 each when the stock was trading around $205.00.

Goldman Sachs Group Inc. went up about +$5.60 intra-day on Wednesday, 21 Mar 2007 to close at $210.95 after the Feds announced a possible rate cut.


On 22 Mar 2007, I sold one contract of the Apr 210 Call for $590, gaining a paper profit of $230. I'm still keeping the other contract because next week being the end of a quarter, the funds manager would be stocking up shares which had recently reported good earnings, and Goldman Sachs Group Inc. happened to be one of them. I would most probably sell the remaining contract by end of the month.

If you've managed to find out about the Live Freely! Seminar from my stock options trading blog and subsequently sign up for it, I hope you could do me a kind favour and mention Mr Tony Chai from Batch 14 as the referrer. Thank you for your kindness.

I'm still working towards achieving profitable trades consistently.

Wishing you Profitable in your Options Trading too.

Yours Sincerely,

Tony Chai
http://www.myoptionsonline.com

10 comments:

Oky Satriawan said...

Hi Tony,
Great to see you win trading on GS.
For few months, i always watch your blog constantly. As a freely graduate, intake 47, i am really proud of you, and i hope i can follow your success.
I have few questions :
1.why do you still use OX in your trading platform? (i think the commission is too expensive)
2.have you ever trade on pharmaceutical company shares, because sometimes it can gives you so high profits in one night?

Keep up your great job!
Live Freely

Oky Satriawan
Freely Graduate Intake 47
Jakarta, Indonesia

Tony Chai said...

Hi Oky Satriawan :

Thanks for your compliments.

I'm using OX only for paper trading. I still use IB for my real trades.

Options of pharmaceutical cos. usually run up quite expensively nearing FDA announcement. So unless the gap up/down is more than the price you paid for the option, you might end up with a losing position.

Yours Truly,

Tony Chai
http://www.myoptionsonline.com

Shelly said...

Hi. I really like your blog. Was wondering if you want to add it to my directory? Thanks Shelly

http://www.weblog-index.com

Shelly said...

Hi. I really like your blog. Was wondering if you want to add it to my directory? Thanks Shelly

http://www.weblog-index.com

Tony Chai said...

Hi Oky Satriawan :

You might be interested in the following link :-

http://www.drugs.com/new-drug-applications.html

It tracks all the upcoming new drug applications. These information might come in handy if you are interested to trade options based on FDA approval.

Yours Truly,

Tony Chai
http://www.myoptionsonline.com

Oky Satriawan said...

Hi Tony,

Thanks for your useful information.
Have you ever traded on pharmaceutical company shares? please tell me your experience if you don't mind..

Live Freely!
Oky Satriawan

Tony Chai said...

Hi Oky Satriawan :

I have traded pharmaceutical cos. awaiting FDA announcement. However, I did not go in-depth or long period into it because the high expectation of the FDA results tend to inflate the implied volatility and subsequently the premium of the call and put options substantially.

Oky Satriawan said...

Hi tony,

beside in your blog, where do you post your winning trade report especially in freely website?

thanks, keep up winning trade!

Live Freely!

Oky Satriawan

Tony Chai said...

Hi Oky Satriawan :

I post my trades mainly in this blog as I like to give a description of the reasons why I entered a particular trade. I hope fellow options traders could pick up some of the skills in them.

Yours Truly,

Tony Chai
http://www.myoptionsonline.com

Chus said...

This is what I think: Goldman Sachs Earnings