Posts Tagged: trade

FOREX / Options — 14 Comments
25
Jan 10

Trading Contracts against the Australian Dollar this time

trading contracts in AUD optionsWe are trading contracts in the Australian Dollar (XDA) put options. This is the AUD (Australian Dollar) against USD (US Dollar) FOREX instrument that is traded in the Philadelphia stock exchange. We are buying put options which means we expect the AUD to fall against the USD.

The AUD has been moving up nicely over the last few months and we have collected our trading gains on the currency. But we do believe the tide is turning a bit especially with the “cooling” plan that China has indicated recently. Our expectation is for the AUD/USD FOREX pair to fall to around 0.8730 first and then potentially go all the way down to 0.8360.

We are buying the March 90.50 puts at a premium of $234 per contract. We expect this trade to be closed sometime in February 2010 for a nice gain in the premium.

Note: Options traders should note that the new options contract naming has gone into effect and every broker may have their own naming convention. My broker’s naming convention is quite easy. For this trade it is XDA100320P90.5 which can be translated to SYMByymmddP90.5 (where P stands for put and 90.5 stands for the strike price).

We will provide update here on how we did with this trade.

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FOREX — Comments Off
5
Jan 10

Shorting EUR/JPY FOREX pair

EUR FOREX currency pair tradeWe are making a FOREX trade against the Euro (EUR) with the expectation that it will drop in the near term. The month of December 2009 has seen a full 180 degree about turn by traders on their expectations for the EUR. From playing for a rise at the beginning of the month, traders now are banking on the EUR to fall as can be seen from the EUR contract transaction data. The situation with Greece is probably the prime reason but the other PIGS nations namely Portugal, Ireland and Spain are helping as well.

However, we are not shorting the EUR against the US Dollar (USD) as we are not sure of the USD direction in the near term. A safer bet is to go with the Japanese Yen (JPY). So, we are shorting (selling) the EUR/JPY currency FOREX pair and looking for it to move down to around the 129 mark. We sold the FOREX play at 131.90. A move down to the 129 level would give us a gain of around 300 pips.

 

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Options / Stocks — Comments Off
5
Jan 10

Trading Google call options

Google call options tradeWe are making a Google (NASDAQ: GOOG) call option play on a couple of news items. One is their announcement on Nexus One phone based on their Android OS. The other is our anticipation of good 4th quarter earnings they will announce middle of January. Granted, the Nexus One announcement is probably already baked into the stock price. But we think there is still some room for the stock to run.

There are some good things happening for Google as well. The stock price target recently got upgraded to $810 by FBR. That is quite big given that the stock price has been on a run lately. In the last 1 month the price has gone from around $585 to $625 which is close to a 7% rise.

There is still speculation in the market as to whether the Google phone will cause any dent in the Apple iPhone sales. We agree with the market that it will not. However, the smart-phone market itself is expanding at a rapid pace and that fact alone provides some market to Google. And there are strong predictions for mobile search to take off in the next 1 – 3 years which again spells good for Google. The bottom-line for Google is that it is not a negative to have the phone. And their bread and butter business of search is intact.

We are entering into a short term out-of-the-money trade by buying the February 2010 $700 call options at a premium of $320 per contract. This means that we would need the stock price to go up over 10% to be on-the-money. However, our expectations are for a modest gain of around 50% in the contract premium at which point we will sell the call options and get out of the trade. Our expected holding period on this trade is under 4 weeks.

 

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FOREX / Investment Strategy / Options — Comments Off
4
Jan 10

First 10 weeks of Options and FOREX trading performance

Our strategy of posting our options and FOREX trades and investments in this blog is working out well. We have had strong gains trading in Options without getting into too many complex trades. We will not go into details of the winning trades again, but they have been listed in the “Tracking” page.

Going forward we intend to track our performance through a monthly article instead of a running record within the Tracking section. We will post the summary performance under the tracking page.

We are also in the process of tightening our trading plan. This will be more of a collective trading plan designed by our editors and we hope to build in a “best practices” guide from this exercise. The trading plan is also going to include lessons learnt from the past. For instance, while we feel our options trading has gone well, our FOREX trading plan still lacks enough discipline and risk management. More on these topics coming soon.

 

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Investment Strategy / Options / Stocks — Comments Off
24
Dec 09

Taking 100-percent gain on half of Netflix call options on same day

netflix call options trading profitOur immediate target for Netflix (NASDAQ: NFLX) call options was reached late yesterday. We decided to take profits on half of our holdings for a gain of 100% within the same day of purchase. That means the balance holding is free of cost to us as we have already recovered our total cost by selling half the portion.

Our entry price on the January 2010 $60 call options was $45 per contract. We sold half of the contracts at a premium of $90 per contract giving us our 100% gain. In the last 5 trading days, the stock price has gone up nicely from around $53.5 to trade at around $57 at the time of this writing. We usually do not tend to hold on to a trade after it has reached our target. But this time we see good momentum in the stock price and feel we can let it run for a little while longer. Plus the chatter on a takeover is increasing.

Reed Hastings is smiling and so are we.

 

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Investment Strategy / Options / Stocks — Comments Off
23
Dec 09

Trading call options on some Netflix Amazon rumors

netflix call options rumorsThere is considerable chatter in the options market about Netflix (NASDAQ: NFLX), the online DVD rental company. The traders are looking at a uptick on NFLX as seen in the options activity. Huge trading volume was seen in the January $60 call options which are still around $6 out-of-the-money. So NFLX would have to go up by around 10% between now and January 16, 2010 for these traders to be in the positive with their options.

However we do not, for a moment, think that traders are looking to keep the trade till the expiration. There is some speculation that Amazon (NASDAQ: AMZN) may make a bid for Netflix. That surely is a huge catalyst for a quick uptick in the stock price. The question is whether something will happen before January expiration. We are going to bet that it will. We are buying the NFLX January 2010 $60 call options at a premium of $45 per contract. Our target is for the premium to double and we will be out of the trade.

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Options / Stocks — Comments Off
16
Dec 09

Retail speculations using Macys call options

We are making another speculative trade (perhaps the last one for 2009) in Macys (NYSE: M). This is again a cheap speculative play thinking ahead of the holiday shopping season. We are buying the January 2010 $20 call options at a premium of $20 per contract. Yes, this one is really cheap but we also have very limited time for the stock to move. It’s current price is just a shade under $17. So, it will have to move around $3 very quickly for us to make any money on this trade. That is over 15% from its current price. So, it is a very speculative trade. But the amount of risk is low and we think the risk reward profile of this trade makes it quite a compelling trade to make. Let us see how compelling the gains turn out to be.

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