The table below shows the company, ticker, Friday's per share % increase, and Friday's volume increase (% increased compared to 50 day average). For your convenience I have ranked the stocks in order from greatest to least volume % change.
| Company | Ticker | Price Change | Volume Change |
| Metabasis Therapeutics | MBRX | 35.92% | 2376.53% |
| Sunrise Senior Living | SRZ | 44.55% | 1415.22% |
| Skillsoft Plc Adr | SKIL | 2.75% | 843.43% |
| Hong Kong Highpower Tech | HPJ | 33.04% | 804.58% |
| China Automotive Systems | CAAS | 16.20% | 799.76% |
| Netsol Technologies Inc | NTWK | 20.79% | 711.02% |
| Ultra Clean Holdings Inc | UCTT | 22.86% | 609.70% |
| Nautilus Inc | NLS | 36.14% | 518.98% |
| Dot Hill Systems Corp | HILL | 11.50% | 381.62% |
| John Hancock Inc Secs Tr | JHS | 1.07% | 339.01% |
| Eight By Eight Inc | EGHT | 9.09% | 305.93% |
| M L P & Strategy Eq Fund | MTP | 4.21% | 303.90% |
| Salem Communications A | SALM | 16.67% | 301.91% |
| B B V A Banco Frances Sa | BFR | 7.70% | 269.39% |
| Datalink Corporation | DTLK | 6.03% | 269.03% |
| Mcclatchy Co Hldg Cl A | MNI | 19.62% | 262.99% |
| Skystar Bio-Pharma Co | SKBI | 9.88% | 216.45% |
| China Transinfo Tech | CTFO | 4.71% | 208.92% |
| Span Amer Med Sys Inc | SPAN | 4.49% | 200.00% |
| Calavo Growers Inc | CVGW | 9.21% | 183.13% |
| Jamba Inc | JMBA | 10.81% | 179.90% |
| R C M Technologies Inc | RCMT | 11.91% | 175.18% |
| Navarre Corp | NAVR | 7.05% | 174.73% |
| Semitool Inc | SMTL | 2.79% | 165.05% |
| Cerner Corp | CERN | 3.84% | 154.10% |
| Nortel Inversora Sa Adr | NTL | 9.68% | 122.43% |
| Nu Skin Enterprise Cl A | NUS | 5.25% | 120.09% |
| Phoenix Companies Inc | PNX | 8.48% | 71.13% |
| Tessera Technologies Inc | TSRA | 3.79% | 65.01% |
| Taleo Corporation Cl A | TLEO | 5.22% | 59.84% |
| Baidu Inc Ads | BIDU | 3.49% | 59.48% |
| Perfect World Cl B Ads | PWRD | 2.31% | 37.25% |
The two stocks which I will be writing about today are Baidu (NASDAQ:BIDU) and Perfect World (NASDAQ:PWRD).
Perfect World Option Trade: I believe Perfect World has a shot of getting back to 50 a share (as it hit on September 23, 2009), after it reports earnings on November 9. With just 5 days left until the October options expiration, I would look at selling put options to get some money to speculate with on Perfect World. Note that I don't mind holding this stock long which is why I am willing to sell put options. I would look to get $25 per option contract by selling the October 40 strike put options. I would then wait until November 5 or 6 to look at selling put options 10-15% lower to finance out of the money December call options. Note I would be looking to sell these put options 10-15% lower a few days before earnings on high levels of implied volatility. If I were to open this position today, I would look at selling the 40 or 35 strike put options for November, and purchase the 50 to 55 strike December call options with the money received. Note that closer to the earnings release the implied volatility should increase quite significantly, causing the put options 10-15% lower than the share price (at that time), to go for a bit more than today. This is an all out bullish strategy on Perfect World that will allow me to speculate for a bit less, however I am willing to own shares at the 35-40 per share price level. It may also be worth looking at opening Calendar call spreads to capture the volatility, and/or ratio put spreads to protect a bit more to the downside, because when dealing with a stock such as Perfect World (up 500% from 52-week low), we know it can decrease in share value just as fast as it increased.
Baidu Option Trade: With just over 1 week until Baidu reports earnings, I am looking at opening a November straddle the next time it approaches a strike price. It is currently closest to the 430 strike, so this is what I'll use in this example. The next time Baidu approaches the 430 a share mark during regular trading hours, I would look at opening a straddle for the November expiration. I would do this by purchasing both the November 430 Call and Put option. Baidu reports earnings after the bell on Monday October 19, so I would look to close this straddle by 3:30 PM Monday. The day of earnings always drives the implied volatility on the options higher, causing the options to be valued higher. The optimal case for this type of position would be if Baidu can trend one way or another after it crosses the strike. This would allow this position to be most profitable at close. The amount lost from this is limited to the decay of both legs of the option position by day of close. This is an option speculation play only. However, it wouldn't hurt you to track the position by keeping daily notes on how the position would pay off at the end of each day, from open until close (the purchase price at strike approach until the day of earnings).
The ideas outlined above involve the use of stock options. The reason option volumes have surged in the last 5 years is because they are a great way to hedge your portfolio as well as create income off of your shares (see option volume chart).
These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.
Disclosure: No Positions
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2 comments:
Marco, how long would you keep these companies on a watchlist? Do you do so only for the week since expiration is around the corner?
I keep them for quite a while, but label each watch list I make. I would look to get in on weakness and sell on strength. Today PWRD traded down to mid 39's and I sold the 40 puts there for October expiration. I will take the stock at an adjusted cost of $38.50 a share, or perhaps finish the week up $150 per contract. If I do I will roll the $150 into a speculative position for December, perhaps a vertical call spread which will leave me profitable still.
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