Tuesday, January 30, 2007

Options Trade: International, Ltd


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1. Why did I take this trade? International Ltd (Nasdaq: CTRP) was a pick in the HCPG newsletter from a couple weeks ago. I decided to keep it on my watchlist because stocks from China have been hot recently. When it gapped up to 69 last week, I put it back onto my watchlist, with an alert level @71. It hit the 71 early in the morning and fell back down, so I started stalking it. The fourth time it broke above 71, I bought some Mar07 75 calls.
In retrospect, the Mar07 75 calls were not the best choice because of the low option volume.
I found out later that there was another trader, Russ, who bought CTRP @70.45.

2. What was the initial stop?
Initial stop was just below congestion @70.75.

3. Why did you exit where you did?
I was overly cautious to begin today's trading session. When I saw that CTRP was falling down from its opening price, I lost any interest in finding out where today's intraday support level would be, and promptly sold my calls

4. Is there anything you would do differently?

This question was tough to answer for CTRP in this particular scenario. It's the same as asking, "How much profits are you willing to give up in order to realize even more profits?"
Even though CTRP is currently at 73.63, it could just as easily have been testing 72 instead.
Under what conditions could I have seen myself holding? At the minimum I would want to see a green bar to open to at least indicate that there are buyers stepping up to the plate. Plus it would give me a possible intraday support level to work with. Neither of those happened in the first 15-min, so I wasn't willing to give up profits.
In other words, the break above 73 @ around noon would have been a new and separate trade from my point of view.
Note that the breakout above 73 was messy - that subsequent dip down to 72.70 took out a lot of stops I'm sure.

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