Shorted 6300 shares BIDU at 375.18… This…

View the full post on Jack’s blog…

Blian, I don’t mean to intrude your site with my needless scalps. For completeness sake, I covered 4500 shares at 365.81 which I shorted on Dec 3, 2007 at 380.79. Team, be advised that the shares are a bit oversold on the hourly and daily charts.

EDIT 2:09 PM (Blain): No problem Jack! Readers, you can find Jack’s original short on BIDU for reference. Total profit on this trade is just over $67,000. Read more of Jack’s trades as they happen live on his new blog.

Shorted 4500 shares of BIDU at 380.79. The shares have surged significantly on low volume from 328. Because the market is up nearly 590 points since Monday, a pullback will take BIDU with it. As always, I have a pyramid in mind in case the shares decide to go further north.

Wachovia Director, Lanty Smith, has added another 37,000 shares on Wednesday (11/15) after an initial purchase of 100,000 shares. Since the end of August, Smith has purchased almost $8 million dollars of WB at prices between $38 and $48 a share. Smith now owns 220,000 shares of the bank.

Peter Lynch famously once said, “There are a multitude of reasons insiders sell shares that have nothing to do with the health or the future of the company. I can only think of one reason they would use their own money to buy shares, they think the share price is going up.”

Ladies and gentlemen, I Initiated the following position today:

Bought 6 blocks (60,000) of AMD at an average price of 11.32.  To hedge the shares, I decided to use a combination of “out of the money” and “deep in the money” Dec calls.  Thus this strategy is termed the “covered called” strategy where the calls’ premium will be provide a hedge against the underlying shares in a downside.

I wrote (”sell to open”) 200 Dec 11.00 calls at .98/contract, and 100 Dec 12 calls at .38/contract.  The strike 11.00 (deep in the money) will earn me .66/share in intrinsic value upon Dec option expiration, if AMD closes above 11.00/share.  If it closes below, I get to pocket the entire .98/share premium and keep the shares.   I wrote 400 Dec strike 12.00 (out of the money) calls which will generate .48/share, regardless if the shares are above or below 12 by option expiration. 

Here is my rationale: AMD today dropped 6.6%, to $11.28. Why? Well, I’m not sure. Last week, the company sold an 8.1% stake to a unit of Mubadala Development Co., an investment company owned by the government of Abu Dhabi, for $622 million, or $12.70 a share; the investment is already off 11.2%, a loss of almost $70 million.  But that is all just context; it does not explain today’s slide. 

 Let me be vey clear that I have never been a fan of AMD, especially during the times when the company had a solid edge over INTC (2003).  INTC has clearly reduced them to rebels since they launched a series of new generation chips (Zeon 5600 Core 2 Duo and Quad Core chips).  Now, with INTC’s new 45nm chip, Penryn, AMD is definitely behind.  Wachovia Capital markets analyst David Wong said in a note to investors that AMD’s quad core models worked at speeds well below Intel’s quad-core offerings, which top out at 3 gigahertz.  Tech Web site, AnandTech,  concluded that AMD’s 65-nanometer Phenom is inferior to Intel’s similar-sized chip.

However, we cannot undemine the fact that AMD will always be INTC’s number rival.   I fully undestand that AMD is cash starved at the moment… But at these depressed share levels, it’s a great “take-over” target! 

In addition to the above core holding, I will be scalping shares of AMD on an intraday basis to further maximize on the daily volatility.  Also, I will be adding to my core holding accordingly, at the proper pivotal points.

To make serious money, you must have the tenacity to go into sectors that everyone is abandoning.  Retail and financial stocks have taken a beating in the past 4 months and continue to make investors very nervous.  That said, several stock pick strategies offer good long-term return:

A.  WM:  I have been monitoring the shares since they began their steep decline from 36.  I understand that the New York Attorney General’s probe into WM’s practices is concerning, but he has not named the financial powerhouse a defendent nor does he plan to file a suit against them.  He is only interested in examining the allegations made by several title companies on whether WM deliberately inflated home appraisals.  The selling at 18-20 is overdone.   If you desire to “buy and hold”, the Dec and January slightly “out of the money” calls are very attractive.  I wouldn’t buy the calls, but would rather write them.  In writing calls against shares, the time decay on the calls works with you and not against you.  In other words, when youre purchasing calls in hope that the shares appreciate before expiration, you risk the time decay value on the calls if the shares stay stagnant.  However, if you had written the calls, the decay on the time value will only add dollar value to your account. 

Anyhow, I recommend the current shares coupled with the Dec strike 22.50 calls which are paying nearly 1.20/contract.  At 20.00/share, you nearly have 1.20 in downside protection from an already beaten share level.  Should the stock descend lower than 18.80 (break-even- point), the shares are still worth holding for the long term.  At that time, you can “buy to cover” the Dec calls and roll them into the January calls, either strike 22.50 or 20.00.

 Moreover, in the event your core holding trends lower to the point where your shares are significantly lower than your original “call strike”, you can either dollar- cost -average by adding additional shares or simply scalp the shares on an intraday basis to help offset the losses on your core holding. 

Last but not least, it’s always encouraging to know that an insider has expressed interest in the shares at these levels.  According to an SEC Form 4 filing from last Tuesday, William Reed, WM Director, bought 10,000 shares for 20.21.

B.  WB is another attractive strategic play.  At 39.20/share, the Dec strike 40 presents a good downside risk/reward ratio of 1.70/contract.  You can write the calls against shares, knowing that you have a downside protection to 37.50/share.  Thereafter, the calls for Jan, Feb offer very juicy premiums to further earn money while your underlying shares mature.

The integration of World Savings bank into WB is going to be very positive on WB’s balance sheet in the upcoming year.  This indigestion will only add dollar revenue for WB.  Furthermore, an insider from WB bought last thursday.  According to an SEC Form 4 filing, Lanty Smith bought 37,000 shares of common stocks for 40.51 to 40.75/share. 

C.  M and JCP are my favorite in the retail sectors.  It is comforting to know that M entirely owns 56% of their stores’ land.  This percentage is far greater than any retail chain brand thsat I know.  Besides, the May department stores it bought in 2005 will be of great value in 2008.   Also, if KKR liked  M as a take-over for 51/share, don’t you think theyre salavating to buy them at 28?

The calls on M offer the most in premium value.  Consider Dec or Jan strike 30s.  While, I don’t own any of M or JCP, i will very soon establish core positions in both.  Meanwhile, I have been scalping both on an intraday basis and have done quite well. 

 JCP is superbly attractive at 43/share.  It’s PEG suggests that the shares are worth 91.  That is a discount value of 50%! 

 I will keep you posted as I buy any of the above mentioned shares.  Over the years, I learned to go into securities that everyone is avoiding.  To that end, becoming a contrarian has done me the justice I deserve!

NTRI is looking attractive as it continues to test new lows. This will pressure the short float (greater than 53%) to cover and lock profits. As a result, shares will be bought back and the stock will surge. It is beyond me how punished the shares have been since the announcement of the company’s last quarter. Though the stock has been known to be very seasonal and volatile, a plunge from 55 in the past 3 months is overdone. Bear in mind, this is a stock that has a very good cash flow with zero debt! Investors fled the stock after LLY’s over-the-counter weight loss drug began selling. I assure you that the popularity of this drug would be short lived due to the dibilitating gastro-intestinal side effects. Thereafter, NTRI will once again be the center of focus and shares will trade north of 50/share.

Be advised that NTRI’s market is now in Canada, France and Germany. I can only imagine what that will do to their growth and revenue!?

Folks, JCP is noteworthy of your attention…. Today, I scalped (intraday trades) it 33 times in ranges of 12 to 25 cents.  The stock made an intraday 52 week low of 43.40.  For those looking to establish a “buy and hold” postions in retail, JCP jhas been beaten from 68.00/share.  I recommend buy the underlying shares and write “out of the money” Dec strike 45 calls which are paying a staggering 2.70/contract (100 shares).  If the stock is below 45 by end of Dec, you get to pocket the entire premium, keep the shares, and have an oportunity to write a new set of Jan 45 calls.  All in all, the shares are worthy of dollar-cost- averaging.  Therefore, the current share level is a good entry.