Monday, May 17, 2010

BIDU ITM Bull Call

BIDU recently had a 10:1 stock split and has had several days in bullish territory since. The trade I'm doing is high risk in that there is no real easy adjustment to it. I am planning at tomorrow's opening to buy to open May $70 strike calls at $4.00 per share and sell to open May $72 strike calls at $2.40 per share. This would give me a net debit of $1.60 per share and a difference in strike prices of $2.00. If BIDU finishes the week above $72.00 per share I will have a net ROI of 25% on a four day trade. I will get called out on ITM short calls but have long calls to cover them at $2.00 per share less. Like I said, there is no easy adjustment to this trade so it is high risk compared to many trades I do. BIDU dropping fast could cost me my entire debit in the trade so I will be watching it closely the next few days. One other note is that I will use a limit debit order of $1.75 per share to open this trade because if I have to pay any more than $1.75 per share the trade is no longer worth the risk. I'll keep you posted on where it fills and what I do with it for the rest of the week.

1 comment:

Jeffry said...

I dodged a bullet in this trade because mine did not fill.

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