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

A Winning Trade - Lehman Brothers Holdings Inc (LEH)

Dear fellow options traders :


There were a few Investment Brokerage firms reporting earnings this week. These include Lehman Brothers Holdings Inc (LEH), Goldman Sachs Group Inc. (GS) & Bear Stearns Companies Inc (BSC). I've checked that the sub-prime mortgage jitteries were not over and some of the companies mentioned above had certain exposure to such risks, though the exposure were limited. On 16 Feb 2007, Banc of America's analysis reported an equity impact of roughly 9% on average for Bear Stearns (BSC) and Lehman Brothers (LEH), and 3% for the others.

Goldman Sachs Group Inc. (GS) would be reporting earnings on 13 March 2007 before market opened and Lehman Brothers (LEH) would be reporting subsequently on 14 March 2007. I had a feeling that if GS's stock price fell on 13 March 2007 because of bad earnings related to the sub-prime mortgage problems, LEH's price might also drop and I might not be able to fetch a good price for March 70 Put on 13 March 2007. Thus I bought a Lehman Brothers (LEH) March 70 Put for $30.00 on 12 March 2007 when the stock price was hovering around $75.00.

But Goldman Sachs Group Inc. (GS) reported good earnings on 13 March 2007 and gapped about +$2.00 to $204.96 when market opened. By 11.00am EST, GS reached +$4.30 to $206.92. However, another bad news broke out again from the sub-prime mortgage sector, this time it was from Accredited Home Lenders (LEND); and that sent the stock market spiraling down after mid-day. GS and LEH were both naturally hit, as GS closed down to $199.03 and LEH dropped to $72.00 on 13 March 2007.

On 14 March 2007 before market opened, Lehman Brothers (LEH) reported 1st quarter earnings of $1.96 per share, $0.01 better than the Reuters Estimates consensus of $1.95; revenues rose 11.3% year/year to $5.05 bln vs the $4.94 bln consensus. LEH initially gapped down -$1.00 to $71.00 when market opened. I monitored the Level 2 code, price & volume chart of LEH very intently when it opened for trading and realised that the stock price was slipping gradually minute after minute. I held my position until 10.04pm EST when LEH dropped to about $68.80 and I sold my put contract for $185.00, gaining a profit of $155.00.


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

A Winning Trade - Blue Coat Systems Inc. (BCSI)

Dear fellow options traders :


Blue Coat Systems Inc. (BCSI) has been beaten down quite badly in the year 2006, from the peak of $45.00 on 3 Jan 2006 to as low as $13.00 in mid Aug 2006. By the way, BCSI Blue Coat Systems Inc. provides proxy appliances that visibility and control of Web communications.

On 6 Feb 2006, BCSI gapped down -$13.00 to $27.79 due to guidance warning. On 15 Feb 2006, BCSI gapped down another -$5.00 to $19.69 when it announced earnings with downside guidance. On 25 May 2006, BCSI gapped down another -$3.50 to $16.00 when it announced that its 4th quarter earnings missed by $0.02 and also issued downside 1st quarter guidance - These were the series of events in 2006 which led to BCSI's stock price decline.

But BCSI started to pick up momentum from mid August 2006 onwards, rising from the low of $13.00 to about $26.00 by end Jan 2007. Things turned a bit more optimistic when BCSI announced on 8 Feb 2007 that it expected 3rd quarter revenue to be in the range of $45.5-$47.5, mln up from $40-$45 mln announced earlier. On 9 Feb 2007, BCSI reacted positively by rising about +$2.60 intra-day to close at $30.82. Even during the stock market crunch on 27 Feb 2007 when the Dow Jones Industrial Average gave up 400 points, BCSI only dipped to about $32.00 and stayed at this support price level till 8 March 2007, which was the eve of BCSI earnings announcement.

On 6 March 2007, I bought a OTM (out-the-money) March 35 Call for $55.00 per contract when BCSI was hovering around $31.80. The reason why I was confident to buy a call contract was also because I've checked from Form4oracle.com that there were some insider purchasing by 10% Owners sometime around mid Feb 2007. When a company's officials start buying their own company's shares, it's usually (but not absolutely) a sign that they are confident of the company's share performance in the next few months.

BCSI didn't disappoint. On 8 March 2007 after market close, the company reported that 3rd quarter (ended in Jan) revenues rose 32.6% year/year to $47.1 mln vs $45.9 mln Reuters consensus. In addition, BCSI guided 4th quarter revenues to be $51-54 mln vs $47.0 mln Reuters consensus. However, the company did not report EPS due to continued options review.

On 9 March 2007 (Friday), BCSI gapped up +$3.00 to open at $35.00. I monitored the Level 2 Code closely and sold my March 35 Call for $155.00 when the stock price was $35.95 at 10.08 am EST.


Related Trade in my Stock Options Trading Blog

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

A Trade On Accredited Home Lenders Holding Co. (LEND)

Dear fellow options traders :


I was alerted to the deterioration of the housing mortgage market when NovaStar Financial, Inc. (NFI), a company which originates, purchases, invests in, and services residential nonconforming loans in the United States, suffered a 41% plunge on 20 Feb 2007 after its disappointing 4th quarter earnings results.

Actually on 16 Feb 2007, Banc of America already commented negatively about the Mortgage Lending group. The firm's report included IndyMac (NDE), Countrywide (CFC), Washington Mutual (WM), New Century (NEW), Accredited (LEND), Novastar (NFI) etc.

I paid attention to Accredited Home Lenders Holding Co. (LEND), one of the sub-prime mortgage lenders, when I read from briefing.com that shares of "subprime" lenders continued their decline after federal bank regulators asked them to be more cautious when making the high-risk loans and scrutinizing borrowers' ability to repay them.

I further understood that lenders who offer subprime mortgages -- which are higher-interest loans for those with bad credit -- have been forced to set aside more reserves against potential loan losses and have seen their stock prices slashed in January 2007.

Elsewhere, government-backed mortgage giant Freddie Mac (FRE) on Tuesday, 27 Feb 2007, said it would no longer buy subprime home mortgages it deemed most vulnerable to default or foreclosure.

All these news prompted me to buy a OTM Mar 17.50 Put of LEND on 1 March 2007 at $20.00 a contract, to ride on further pessimism of the subprime mortgage lenders market.

On 5 March 2007, more bad news surfaced from the mortgage lenders market, if not already worsened by the 3% plunge of the Japanese stock market earlier that day. Such snippets include : New Century Financial Corp. (NEW) saying on Friday (2 March 2007) that it was facing a federal criminal probe, HSBC HLDGS PLC ADS (HBC) booking $10.6 bln in losses on bad loans and an analyst downgrade on Countrywide Financial Corp. (CFC); were exacerbating problems associated with the sub-prime mortgage market.

Accredited Home Lenders Holding Co. (LEND) joined in the foray too, announcing that it had filed a form NT-10k with the SEC, stating that its 10-K would be delayed until 16 March 2007.

On 5 March 2007, LEND gapped down about -$4.00 to $17.86 when market opened and I sold my Mar 17.50 Put for $150.00 when the stock was hovering around $18.00 at 9.54am EST. LEND went down -$1.80 intra-day to close at $16.00.


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