Friday, August 24, 2007

A Trade on Blue Coat Systems Inc (BCSI)

Dear fellow stock options traders :

Have been observing Blue Coat Systems Inc (BCSI) development for the past 2 years.

This company provides WAN optimization hardware appliances and software for controlling and securing Web-based communications in the secure Internet gateway and WAN application delivery markets worldwide.

Between Nov 2005 to Feb 2006, BCSI has dropped from a high of $51.00 down to about $23.00 when the company guided EPS and revenue lower due to substantial slowdown in pipeline during that period.

Situation has turn around for BCSI since the beginning of 2007 as the company has regained leadership in the WAN optimization market. Confidence was restored as substantial insider buying were observed between Feb to Mar 2007.

I've traded a call back in end May 2007 for BCSI Q4 earnings but it didn't move much as it was met with Shanghai index drop of 6.3% earlier in the day.

This time, I've observed the momentum of BCSI share price going strong towards its earnings announcement date on 22 Aug 2007. I've also checked that a few analysts have upgraded the stock based on growing demand within the wide area data services market.

Thus, I paper traded a Sep 60 Call at $440.00 per contract on 21 Aug 2007 before market close.

On 22 Aug 2007, BCSI didn't disappoint and reported Q1 earnings of $0.43 per share, $0.08 better than the Reuters Estimates consensus of $0.35. Revenues rose 71.4% year/year to $62.4 mln vs the $58.8 mln consensus. BCSI also issued upside guidance for Q2, expecting EPS of $0.43-0.50 vs. $0.37 consensus; expecting Q2 revs of $67-70 mln vs. $61.65 mln consensus.

The earnings report resulted BCSI to gap up +$8.00 to $68.00 on 22 Aug 2007. The share went up further 9 points to close at $77.31.

I sold the Sep 60 Call at $960.00 around 9.40am EST for a profit around $490.00.

Related Trade in my Stock Options Trading Blog

A Blue Coat Systems Inc. (BCSI) Q4 Earnings

A Blue Coat Systems Inc. (BCSI) Q3 Earnings

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.

Wishing you Profitable in your Options Trading too.

Yours Sincerely,

Tony Chai


RT said...

Hi Tony,
Thanks for your comments on my blog they are really appreciated.To answer your question my portfolio tends to track the Dow/US markets more although recently due to the decline in the value of the dollar I have been buying more UK stocks to mitigate the currency risk.You look like you have a great blog will bookmark it and have a look around.

Best Wishes


Tony Chai said...

Hi Alan :

Thanks for your comments.

I realized you trade oil related stocks like Valero Energy (VLO) which is also trded in the US.

Traded oil related stocks require close supervision of demand/supply of crude oil/gasoline. But this time round there seems to be no major hurricane which is going to impact the Mexico Gulf region (oil rigs).

Best Wishes,

Tony Chai

"2SenseUp" said...

I have to say, this is an informative blog. - HERMIE a.k.a. hersmart4ever on mylot

Anonymous said...

Hi TC,

Since you have monitor BCSI for 2 years, you should go ahead with real trade. I have been following your trade and i believe you could do very well with so many pratices.

Happy Trading.

Tony Chai said...

Hi :

First of all, thanks for your comments.

I guess you can call this a first bitten twice shy situation that I've encountered with BCSI.

Back in 2005, BCSI earnings were well received in the 2 quarters (ie. June & August) that the stock gapped up at least +$5.00 after earnings announcement.

I was so confident that BCSI earnings in Nov 2005 would receive good reaction from the market and promptly bought 2 ATM call options. On 16 Nov 2005, BCSI dropped -$8.00 after earnings announcement when it beat earnings but provided mixed pre-announcement.

That's why I was a bit cautious trading BCSI after it reported 2 quarters of good earnings.

Yours Truly,

Tony Chai