jay_beckner

I play poker and trade options, seeking edges from study, reflection and analytics.

#024 BIDU Puts

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Trade Details: Bought to open 3 Aug 19th Baidu Inc (NASDAQ:BIDU) 165 puts for $1.45, $441.58 total cost (99.0% of account), 45 days to go. The trade executed at 10:11:51 when the stock was approximately $185.

Potential: I see BIDU trading downward into earnings later this month; if questions about Baidu's fundamentals come into play, then further downside is possible. I expect technical volatility in the $166.50 to $158.50 range. Long story short, I have levels, but I'll be developing an exit strategy as I go.

Thesis: Where trade #22 BIDU Puts was based on the 0.618 target level of the large harmonic bat pattern's CD leg (see daily chart below), this one is aiming for the 1.272 level at $158.45. 

Supporting dynamics include: lingering bullishness in the name (highlighted by message board chatter on this morning's newsy pop), downward momentum on the weekly chart as indicated by the MACD histogram, bearishness emerging in the broader market and sector (e.g. the XLK) and increasing political volatility stateside and in the Asia Pacific.

BIDU daily chart featuring bearish harmonics: a longer-term bat followed by an ABCD and bat pattern in the direction of the indicated move. The yellow boxes are this trade's entry and exit levels.

BIDU daily chart featuring bearish harmonics: a longer-term bat followed by an ABCD and bat pattern in the direction of the indicated move. The yellow boxes are this trade's entry and exit levels.

I've been eyeing this level for a couple of weeks. The entry box, shown larger on the 120-minute chart below, was constructed with the 0.50 (bottom) to 0.618 (top) fib retracement levels of the downward move from the June 8th, news-driven, BABA-related pop. (It's interesting that a news event completed the chart patterns here too.) The bottom of the box is also the 0.382 fib retracement level of the longer-term bearish bat's CD leg discussed above -- all signs point to this being a reversal area.

BIDU 120-min chart featuring multiple bearish harmonic features. I've been watching the yellow box area for a couple weeks to reopen a put position, and I was filled at the top of the box this morning.

BIDU 120-min chart featuring multiple bearish harmonic features. I've been watching the yellow box area for a couple weeks to reopen a put position, and I was filled at the top of the box this morning.

Note: With a limit order, I tried to grab 4 vs 3 of these puts at the open at $1.09 vs $1.45, but there weren't any panic sellers, and the market/spread hadn't been established. When volatility abated, and trading settled around $185, I thought it best to take fewer contracts while the stock traded at the top of my preestablished range.

I'm very happy with my process and patience leading up to this trade, regardless of outcome. However, I'm hoping for a great result and a boost off of effective $0!

#024 BIDU Puts Expired

#023 BIDU Calls Day Loss