Baidu Feb Wkly/ Mar 95 Put Spread Calendar. Dan’s trade suggestion on Options Action

by riskreversal January 30, 2011 4:54 pm • Commentary

–Report 1/31 post close

–Implied move ~8%
–Avg move over last 4 qtrs is ~8%

Price Action/Fundamentals:
-stock already up ~13 ytd
-up 170% in the last 52 weeks
-earnings and revs expected to be up ~60% yoy in 2011
-company benefited this yr from GOOG‘s mishaps in China and pulled ahead in their market share lead (they have 75% of search share in China), i would expect GOOG to move heaven and earth to rectify this….
–street very positive on the stock with 21 buys, 7 holds and only 2 sells…..

–Given this weeks moves in NFLX and AMZN i would expect BIDU to follow suit as we get deeper into earnings season it appears that the high valuation more speculative names are not only hitting the implied moves, but beating them…..

-BUY the Feb WKLY /March 95 Put Spread Calender for 1.50 or ~1.5% of the underlying….
-SELL 1 Feb 95 WKLY Put for .60
-Buy 1 MAR 95 Put for 2.10

–NEXT FRIDAY on expiration of the WKLY if stock 95 or higher the Put that you are short expires worthless and you are long the MAR 95 PUT for essentially 1.50…..
–MAR EXP: 93.50 (-12.5%) or higher on March exp you lose premium that you paid……
–BELOW 93.50 u can make $$$$$$$