17-10-07 : Option strategy for GOOG tonite

We decided earlier that we are bearish on GOOG tonite. Thus we now wish to prepare the right option to enter tonite, to capture this opportunity.

Choices we have are :
(1) Straight Nov 600 Put (OTM) : $21
(2) Straight Oct 620 Put (ITM) : $18.80
(3) Bear call spread Sell 630 Call, buy 640 Call : $11.25 - $8.10 = $3.15
Return = 3.15 / [(640-630)-3.15] = 46% return (> 25% is acceptable)
(4) Straight Nov 620 Put (ITM) : $30.50 (too expensive)

With these choices in mind, I decided to put all 4 choices to the test. We will see the results of these 4 choices tomorrow.

One thing to notice is the price fluctuation of the 2 straight Puts. Their graphs are as below :

(1) Straight Nov 600 Put (OTM)
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Range : $11-$24 ($13)



(2) Straight Oct 620 Put (ITM)
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Range : $9-$25 ($16)

17-10-07 : GOOG direction tonite

I think this will be the million dollar question. 2 days before earning announcement on friday 19-10-07, which direction will the stock goes? This is pre-earning play, and its important to know with precision.

Lets review our technical signs, and deduct the most possible path for GOOG tonite.

15min chart :



5min chart :



Daily, 15min and 5 min charts are all bearish.
Thus expected path of action tonite for GOOG is downfall.

Down. Down. Down towards $610.

17-10-07 : S/R levels for various counters

GOOG : Below $610 is put

GS : Below 224 is Put

RIMM : Below 108 Put

MA : Below 150 is put

BSC : Below 120 is put

AAPL : Above 170 is call

17-10-07 : Various entry points for various counters

Most counters seem to have broken their short term trendline, and going to break their short term support level. These are the support levels and their implications :

Time for put now
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GOOG : Below 620 (already broken). Now will fall to 610, or 600.
MA : Below 160 (already broken). Now will fall to 150.
GS : Will fall to 220

Time for call now
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GRMN : WIll go to 120

Put after break support
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BIDU : Below 300, will fall to 280.
BSC : Below 120, will fall to 110, or 100.
RIMM : Below 108, will fall to 100 to close the gap.

Call after break resistance
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AAPL : above 170 (call)

GOOG did continue to fall before earning

I went insane last nite with a false bullish signal, and went for a call. The damage is heavy, $220 loss.

Mistakes I made :

(1) Went in for a call during a down market last nite. The overall market sentiment is heavily bearish.
(2) The range of option premium was around 13.80-15.60 that time. Buying a call at $15 is expensive towards the top end of the range. Risky.
(3) Fail to cut loss according to my $1 cut loss plan for high volatility stock like GOOG, BIDU. Less volatile stocks like GS, BSC, AAPL and RIMM should be 0.50 cut loss.
(4) Did not wait until the 2nd session of the market before went in for call. Should wait till 1am, as planned.
(5) 15min chart MACD never cross 0 up. It crossed back down below 0 area. Not patient enough to wait for this crucial confirmation signal.

Things I did right :
(1) After confirmed price will stay below $620, cut loss @ $12.80. Price closed @ $11.70. Saved $1.10 if did not sell.

The mistakes are not new. Mainly old, plain, simple mistakes that I have made over and over again. Again, it shows my mental focus is not strong enough.