I forget who it was but in one of the books I read that this is a misconcept because the room to the upside is only theoretically impossible In reality a stock can only move up so far before someone starts sellings. Obviously this wasn't for a penny stock but regular stocks like s&P500.
Hello Harehau, I haven't talked to you in a while. I saw a lot of your recent picks did pretty well. I had a nice run with ATLS after you recommended it. I think you have mentioned UPL before as being one of your favorites. I hadn't ever looked at UPL with any serious consideration until last night. Are you buying it at this level? These are the ones I'm liking right now:
UPL, GPOR, RRC, PDCE (another of your recommendations), EOX, COG, REXX, MMLP (this one is really battered and has a nice 8-9% yield at this price), EXXI. I want to narrow it down further. Which ones would you recommend against?
My feeling is that someone is getting out at all costs. Insane call writing, heavy down volume, down on good news, sold down all day despite LOW's pop are all pointing to someone getting out in a rush. Can the market absorb the flood? I want to see some fight between bulls and bears tomorrow.
How are you playing this? Short LOW & Long HD for me.
There are a lot of options contracts being traded on this- mostly calls. Obviously that is playing a big role in how this stock is acting. The option writers have got to settle their accounts daily and that makes me think this is naked writing since the price in the last hour has always been down on good volume.
My guess is that call buyers don't want to play their hand too early but they are making sure it makes higher lows and higher highs everyday this week.
If anyone tried to chase the price in certain direction they could be sidelined someone else, so the trading is very controlled with no side showing their cards. I think tomorrow will show us atleast one side trying to take charge. I see it heading over 27 tomorrow. But I'm always an optimist so take it all with a grain of salt (or jar)
Whoever is buying up might be doing so on low volume but he is keeping the bid going and the shares keep flying. I don't understand why you are so intent on looking for a negative in everything. Market isn't for the faint of heart--chickens get eaten alive.
Yah, sorry I should have been more explicit. In covered calls you can't take a loss from the calls. Although, you can lose out on lots of profit because of it. Also, you are still exposed to the downside risk from the stock price crash in which case your stocks are the ones giving you the loss not the option you sold. There is a risk everywhere, nothing in trading is risk-free.
The call owners get exactly what they buy. A contract that derives its value from the movement in price of the underlying. So, if the stock price goes up and is closer to the strike price for which you own the call, the call is going to go up. Say at expiry the stock is at $50 and you have a call of $45 you are exactly $5 in profit because you can essentially buy the stock for 45 with your option and then sell it in the market immediately for $50. Say if the dividend goes up, then the options will be discounted even further to adjust for the loss of value in company's net worth (if div is 1M in total then the company has 1M cash less on their balance sheets). If you own the stock you should consider selling monthly calls against your stock. It's going to be small but think of it as monthly dividend. If the stock goes up you are making money because your shares are called at a higher price. If the stock goes down you get to keep the premium the call buyer is paying you. This way you can lower your cost basis. This way you get the dividend yield and the monthly option premium. Win-win.
Leverage is a double edged sword. It cuts both ways. Options is all about leverage. If the stock goes up you can book 100%, 200%, 1000% profits, but if it goes against your direction you also book 100% losses. If you are short on options then you can book losses way over 100%.
Talk about drama, it moved down 1.5% then up 1.5% and settled where it started. That's just normal for any stock. If anyone bought today he is probably down by 1%. Sometimes the market over-react sometimes people like you over-react. Nothing out of ordinary.
It is very hard to find opportunities of market being inefficient and sadly this isn't one of them. The options are so cheap because the company pays a very high dividend. The dividend payout is discounted in the option price for Calls. Basically the person writing the call gets to keep the shares until the particular date in future when the shares get called. the option buyer gets the discount in call price because he doesn't get those dividend despite being long on the stock. On the other hand the puts get the dividend added to them and hence trade at a premium. This is why the calls seem to be on sale when compared to the puts.
GS's downgrade is the best catalyst in itself. If you keep betting against Goldmans suggestions you will do alright for yourself.
The company is profitable, and these days that's a rare thing. It's down from 36 to 26 in last month. The price action tells me that someone else with more money than me is as smart as me to be buying up the stock at present price. I don't know what may happen tomorrow but this move up is long over-due after the extensive sell off and I for one am giddy with excitement.
I say it will hit $32 before that.
All we have are words and we both wasted them on wild speculation. Bring something more to the table.
They might have over-valued and hence over-paid for this acquisition. The impact of NetLogic on earnings was less than expected so based on that the company has lowered the real value of Netlogic and written off the extra paid during acquisition. This could be just a tax play but I think it's bigger than that. The market is fearing that the company may have even more capital (mis)allocation problems. It always starts with a little here and there and then before you know it they pull the rug from under your feet.
On the other hand, the company is profitable, makes good products, still have great margins and the only way from here is up up and away.
Are you still sticking to this call? I've never been in the stock and came across it recently on my screener. I'm thinking of picking up some. Why are you so confident in this company?
I actually like this. The sudden sell of towards the end of the day looks like traders taking out market stops on high volume. There are two sides to every trade and someone has got to be collecting all these shares because the volume is going down. I was glad for today's action because it let me accumulate even more of BRCM. My advise is for others to do the same. By the time everything points to BRCM as a good buy it will already be up 10-15%. Now is the time to step in front of the train and risk it. Worth it.