Considerations:
Fundamentals :
- Although demand for Pre smartphone is growing, it is still selling a small fraction of Pre phones to smart-phones users and most of them are already existing Palm customers.
- I expect the stock to underperform the market as RIMM and AAPL continue to expand market share, and phones based on the Android operating system enter the market.
- With the release of Nokia and RIMM results recently, it is becoming obvious that the smart phone business is not going to be an easy segment to compete.
Technical:
- Palm reached 2 years’ high on September 23rd after earnings announcement. Both RIMM and Nokia stocks were slammed down after earnings this quarter. It is no surprise that Palm will suffer similar fate in December when they released their earnings results.
- Short term indicators have signal negative and stock is testing its heavy resistance at 17.5
Bought a Long Put for Palm today
BTO LP Jan 15 for 1.7
PE :
- 30% ROI within 2 months. If bearish, I may roll the put and continue to play on the downside
SE:
- Stagnant – can adjust to a put calendar as we have a Jan put. Add a SP at a higher strike price in the front month
- Very bullish and breakout : adjust to a bull put. Add a SP at a higher strike price in the same month.
- Slightly bullish: adjust to a put calendar. Add a SP at higher price in the front month
All other adjustments can follow standard adjustments for bull puts and put calendar.
Posts
Possible support around $15.7 to $16. 50 MA is around $15. Currently the price is trying to form a double top pattern. The neck line is around $16. Once the pattern is completed, the target is $14.
ReplyDeleteAs long as the SE is planned ahead, I think the trade will be ok.
For me, I might enter a put calendar Jan/Nov at strike price 15. The BE's are 13.46 and 17.11. It might not make as much profit as a long put, but it should have high percentage of success.
I think this trade is quite agressive. EMA's has not crossed yet (only MACD)and I coincide with Joseph about support levels. Maybe a put calendar would be more confortable.
ReplyDeleteGood luck.
Sergio.
Nozal,
ReplyDeleteThanks for your comment. Normally, this is one case I do not wait for the signal to cross to go in with a long put. The EMA crossing is always a LAGGING indicator. When the stock show signs of 2 years' high, facing resistance and weaknesses in competing in the industry, I do not wait.
I agree fully that this is an aggressive trade. So, I must be ready to adjust to a put calendar or bull put when necessary.
I also like Joseph proposal on calendar. He is a good calendar trader.
It turns out that the risk taker prevails. :-)
ReplyDeleteJoseph,
ReplyDeleteIf it stays stagnant, I may sell a Nov put to make it a calendar.
In a way I am legging in a calendar for a bigger profit.
I have legged into a put calendar for Palm today. I sold a SP Nov 14 for 0.4.
ReplyDeleteSo far the Palm Put is doing well. But with the bullish market overtone, I add a SP. The premium is decent.
If Palm drops to 14, I will roll the SP out and down.
I rolled down the SP from Nov 15 to Nov 12.5
ReplyDeleteMy overall position:
BTO Jan 15 put on 10-15 for 1.7
STO Nov 14 put on 10-21 for 0.4
BTC Nov 14 put on 10-27 for 1.03 ( Loss some money but put has gained value )
STO Nov 12.5 put for 0.95
Current cost basis : 1.98
Current put value : 2.85
Current profit : 1.44 or 70% for a week trade.
I am target a few 100 percent for this trade.
If Palm goes above 15 and shows signs of recovering, I will exit with a smaller ROI.
Ride with the trend and let winning trade run
Finally, I closed my palm trade today.
ReplyDeleteFirst I sold my Feb 15 put on 1/14 for .46 when it got bullish and buy a Feb 14 put for 2.1. At the same time on 1/14 I rolled the Jan 10 SP to Feb 11 SP for a credit of 400.
The uptrend proved temporary. Palm broke down again.
Today I closed the bear put spread of 14/11 for a 2.3 for a profit of 1033.
It was no point keep this trade any further as the Feb 11 SP is going ITM. I am making good money from the Feb 14 SP. The lesson to learn here is with a temporary bullish trend, I rolled the puts but kept it bearish.
Reconciling the accounts, I end with a total profit of 1745 for a profit of approximately 100% for 3 months.