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Sometimes You Need Luck to Make Maximum Money



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May 02 2007
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How many times do you strike a lottery? Once in a lifetime, often hit the jackpot or never no matter how hard you tried? I didn’t strike any lottery, but I striked something which is better than lottery (not that I didn’t believe in lottery but I guess I never have luck with lottery tickets) – I was extremely LUCKY with my option trading which I entered back in Jan-24-2007.

FRK – Will This Cement Leader Performs Again? was my analysis on Florida Rock Industries, Inc. (NYSE: FRK, stock) back then. I was pretty sure this fellow will beats earning estimate although the housing sector was bearish. It beaten earning all right but not enough to make the stock price fly (the earning date was actually re-scheduled to Jan-31-2007after market closed instead of Jan-24-2007).

Florida Rock is just like – it’s name – stubborn as a rock with low trading volume. So it’s rather hard to hit-and-run, instead you have to have tons of patience with this stock. From the chart you can see how it was floating just below $48 per share after the earnings. Then my luck changed for the better – it decided reward me with a huge gap-up.

The triggerVulcan Materials Company (NYSE: VMC, stock) agreed to buy Florida Rock for $ 4.6 Billion on Feb-19-2007. Boy, don’t you just love it? It’s not that your holding stocks will always hit such a jackpot. I call it jackpot as there’s absolutely no way for you to tell or predict if a stock will be acquired, unless you’re the insider who makes/knows such decision beforehand. Looking at the chart I should have sold but you’ll never know what’ll happen to such stock. Furthermore I’ve the time-value to my advantage – so as usual I waited for one more things to happen. I was hoping that the stock will simply goes up further above $ 68 per share. But it never materialized. In fact, looking at the chart I was puzzled that the stock stubbornly floating below the resistance of $ 68 for more than two months. It neither dropped to below $ 66 per-share. It’s as stubborn as a rock.

The option was FRK Jun 45 Call – meaning I’ve tons of time-value and intrinsic value since it was deep in-the-money all because of the acquisition. I have the option to wait for the next earning announcement scheduled on 30-Apr-2007 after market closes. Somehow I remember the phrase that I always quote “Bull and Bear makes money, Pig gets slaughtered”. So I closed my position (reluctantly) just before the earning announcement.

And guess what happen should I decided to keep the position and greedily waited for another gap-up. It gapped-down by almost 2 bucks per share when it said its fiscal second-quarter profit plunged amid a decline in residential construction. For the quarter ended March 31, the company earned $26.2 million, or 39 cents per share (analysts is expecting 64 cents per share), down from $57.8 million, or 86 cents per share, during the same period a year before. Revenue fell to $249.4 million from $364.1 million. This was my second luck on the same stock. Although I’ll still make money should I hold on to it, my profit will be reduced tremendously because the Volatility would have dropped as well.

Hmmm, somehow I’ve a feeling this stock will further rolls down the hill, at least for another couple of trading days. Should I open a Put position to take advantage of it? Let’s see how the stock behaves today, shall we?

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Comments

Ha ha… what an experience. Well done stocktube!

Yes, “Bull and Bear makes money, Pig gets slaughtered”!

yes boon, it was one of the greatest trading experiences i ever tasted … your emotion was put into full-test …

i guess you need to undergo such stress-test before you can reap the reward of over 280% profit … your mental would be tortured to the max … just like the digi promotion – fuyohh!

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