Locked Option Trading Profit – Inspired By Superman-Li

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Feb 14 2007
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Inspired by how “Superman Li Ka-shing Has Done It Again, I decided to take money off the table by locking-in my profits since I have quite a number of opened positions which are profitable. I know I’m not Li – he’s a property tycoon while I merely investing in stocks and trading option to make some pocket money. But I guess the concept is the same – when you’re comfortable with the profit you made, just ring the register. Leave some on the table for others and the Mother Nature will reward you on your next trade. Let’s look at some of the positions which I closed.

Digital River Inc. (Nasdaq:
DRIV, stock) reported a lower fourth-quarter profit and reduced its forecasts for the first quarter and full-year 2007. Digital River earned $16.4 million, or 36 cents per share, compared with a restated $18.1 million, or 45 cents per share, for the same quarter in 2005. Excluding stock-option expenses and other charges, Digital River reported 47 cents per share beating earning estimate polled by Thomson Financial of 46 cents per share. Revenue rose to $83 million against expected $82.4 million.

Despite that, the stock price climbed after analysts decided to support and gave it a pat on the back. Digital River now predicts 44 cents per share in profit for the first quarter and $1.86 per share for the year, including stock-option expenses. Deutsche Bank analyst Jeetil Patel said the forecasts were still in line with Wall Street predictions, and the stock is trading at a discount – reiterated a “Buy” rating with $65 stock price target. BMO Capital Markets analyst Leland Westerfield raised his 2007 and 2008 projections for the company, saying 2006 may mark the beginning of an upturn for the stock.

Such is the power and influence of analysts. Of course one of the reason I invested this stock is because its’ $55 Call option was being bid-up. Looking at the chart, did you notice the stock price peaked on the day after the earning announcement? If only I sell at that moment …

Estee Lauder Companies Inc. (NYSE: EL, stock) – what else can I say about this stock other than “I love it” (its’ Valentine today dude). It reported fiscal second-quarter profit of more than doubled on higher sales and lower costs, prompting it to lift its full-year outlook – and the analysts just love it. Buckingham Research raised the rating to “Accumulate” from “Neutral” for Estee Lauder while Deutsche Bank praised the company’s efforts to look outside of the traditional U.S. department store “comfort zone” maintaining a “Hold” rating.

Leveraging on the good result, I was actually hoping for it to gain more momentum after the first day of the earning announcement. But as the chart has proven, for the next subsequent 7-days post-earning, the stock stubbornly stay below $48 but above $46. To liquidate my position for other trades, I decided to take profit. Furthermore it’s a 169% profit for a 10-days trade. I’m happy with the profit.

Mattel Inc. (NYSE: MAT, stock) beat estimates when strong sales of Barbie and Fischer-Price, along with the high demand for the T.M.X. Elmo boost the fourth-quarter profits by 3%. In the quarter, the company earned 75 cents a share beat analyst estimates of 67 cents a share. I expected a nice gap-up but it gave me a small un-sustainable gap which lasted for another three days before it started an uptrend thereafter.

Looking at the chart you can see how the uptrend stopped at the resistance of $26.5 on Feb-8-2007. Hence when it hit the same spot again, I closed my position to lock-in profit. Because the Apr 25 Call was quite cheap, my 50 contracts managed to bring in good profit of over US$5000. What do you expect from a 2-week trade with over 130% profit? Can’t be too greedy or risk the punishment – I’m actually a bit nervous with the Dow Jones and Nasdaq current level.

Priceline.com Incorporated (Nasdaq: PCLN, stock) reported a fourth-quarter profit that more than tripled and forecast first-quarter sales above analyst estimates. The result – the stock price soared and hit a new 52-week high of $51.39. Its quarterly profit was lifted by strong bookings internationally from its European
brand, Booking.com.

Merrill Lynch analyst Justin Post said that while growth in Europe continues to top guidance, strength domestically was a bigger surprise and was likely helped by higher fares and prices for travel products. Post also said Priceline.com may be benefiting from transaction-related distraction at Travelocity.com that has left continental Europe temporarily less competitive.

Piper Jaffray & Co. analyst Aaron Kessler kept an “Outperform” rating on the shares while raising his price target by $5 to $66. Kessler said Priceline.com is one of his top picks in the e-commerce sector because of its strong international growth prospects, increasing operating leverage and conservative Wall Street expectations. Kessler also believes that the company’s guidance is conservative as it assumes a marked deceleration in both domestic and international bookings despite recent momentum.

I closed the position after the 45-minutes into trading and the stock seems to find hard to breach the highest point within the period. This disturbed me very much of which I preferred to take money off the table. Unfortunately it couldn’t breach the 100% profit within 1 day.

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