BIDU ($137.50) Reports Q3 earnings tonight after the bell.
-The options market is pricing in about a 12% move vs the 8 qtr average move of about 6%.
-Wall Street analysts fairly one sided on the name with 30 Buys, 4 Holds and no Sells.
I think this could set up much like AMZN, AAPL and IBM into earnings….all stocks were massive out-performers heading into their prints up at least 30% on the year….all had expectations that were very high……
There has been a lot of talk about the health of China’s economy and tonight’s results from BIDU could shed a little light on certain pockets of their economic health. I would not place too much emphasis on this, as this company operates a near monopoly in search over there, much as GOOG does here……but any blip or slight deceleration of their torrid growth could cause and out-sized move lower in the stock.
Friday on Options Action my friends and CNBC colleagues Mike Khouw and Carter Worth laid out a bearish thesis on the name and I tended to agree with their thesis. Watch video below:
I’m going to put on a trade in this name that is slightly different, here it is:
MY TRADE: BIDU (137.50) Bought the Oct28 weekly 130/120 Put Spread for 2.20
-Bought Oct 130 Put for 3.90
-Sold Oct 120 Put at 1.70
Break-Even On Oct Exp (tomo):
Profits btwn 127.80 and 120 make up to 7.80, below 120 make full 7.80
Loses btwn 127.80 and 130 lose up to 2.20 and lose full 2.20 above 130.
* stock is moving around a lot, so be sure to adjust strikes if this sort of trade interests you….I am looking to play for the implied move to the downside which gets me to about $120, and I am also looking for an approximate 4 to 1 payout….
TRADE RATIONALE: stock has been a huge gainer on the year up 40%, but also recently up 35% off of this month’s lows…..I want to be contrarian here, but define my risk…this strategy has been working with high fliers in this market and I may continue to press this trade until it doesn’t work.