Throwing darts at the board to find shorts!!!

 Not really, but I want to short every stock, except for those with earnings due in the next 3 sessions. Back in October every stock was oversold. Now, every stock is overbought. I see too many stocks for which I can sell the bear call spreads, and finding it hard to choose from.

 For the Feb options cycle, I am selling bear call spreads for the following:

LinkedIn (LNKD): I lucked out, in liquidating my puts before earnings, but I will be a bear on this stock, until it gets below $60. I am selling $87.50 calls for Feb and buying $92.50 calls for a credit of $1.40.

Regeneron Pharmaceuticals (REGN): Sure enough the best estimates for sale of Eylea have doubled from $160 million to $300 million, but it is ridiculous that stock has doubled in the last 40 days, raising the market cap by $5 billion. I am selling $110 Feb calls and buying $120 calls for a credit of $2.80.

Intuitive Surgical (ISRG): I love this stock, but it has gained almost 15 %( more than $60) in last 2 weeks. I am only betting that its rise will stall for the next few days, 3 days to be more precise. I am selling $515 Feb calls and buying $525 calls for a credit of $2.30.

 With only 3 days left in this options cycle, I feel the best way to trade is to sell bear call spreads, for that stocks that had extraordinary runs.

Going long on GameStop (GME)

   I have cashed out my LNKD puts today, ahead of tomorrows earnings. I did not want to take chance especially after my trade gained better than 50% in 3 sessions. I will be holding my NFLX short options until next weeks options expirations to realize full gains.

    GameStop Corp (GME) is trading higher today after the company announced dividend for the first time. I see several positives for the stock and I am going long on GME today. GME is a very profitable company adding more than $400 million to bottom line every year.

Stock chart pattern has completed a triangle, in the last three months and stock will break either to the upside or the downside. There could be a quick move in the stock price once it breaks out.

     My guess is that, it will break to the upside because of the following reasons:

1. Stock is very cheap, trading at 7.75 times forward earning, 1.1 times book value and no debt. In a world where investors are paying 1000 PE for a social media company and valuing a gaming company with couple of thousand paid subscribers as a $10B company, it makes more sense to invest in GME. 
2.  Dividend announcement will bring new class of investors, into the stock.Yield is better than the US treasury and the payout ratio is very low, still leaving room for company to make investments or buyout shares.
3.  There is too much, short interest in the stock. 34.8% of total floating stock is shorted. After the company has tripled its earnings in past 5 years and the stock has stayed flat, its time for GME to move and short covering will fuel a nice rally.

Courtesy: Yahoo Finance

    While, my reasons for trading the stock the stock are purely technical, its gives great comfort in knowing that the company is doing great fundamentally. I found a bullish article written by Paul Franke and here is the link: http://beta.fool.com/quantemonics/2012/01/29/why-ben-graham-would-love-gamestop/1393/?source=eogyholnk0000001

  

      Factors standing in the way for upside are:

1. Significant resistance around $25 and
2. Disintegration of Europe that might take the entire market down.

February, 2012 option trades for NFLX and LNKD

  Looks like, I got off the train too early. I wish, I held my bullish portfolio for few more days than I did. Markets seem to be jubilant this morning, with good news from all sides. They have come a long way, in last three months. Stocks are not cheap any more and in most cases, reached the price targets for the year. It makes more sense to be a bear now. I will remain bearish on the markets until there is a 3 to 5% correction.

    For February options cycle, I am placing bearish trades on Netflix (NFLX) and LinkedIn (LNKD).

Netflix: There was no reason to celebrate the 600000 new subscribers added by the company in last quarter, especially after the company lowered its forward earnings. It only makes sense, to use a free subscription offered by NFLX for a month during holidays. NFLX was the most hyped company and now a broken one. It is only a matter of time before Amazon starts subscription streaming with its cloud and Kindle fire, and do it more efficiently.

  NFLX has almost doubled from its November bottom and trading today at $126. Price targets range from $90 to $110. Stock is due for a pull back and also faces resistance at $130. I am selling credit spread by buying February $140 calls and selling $130 calls. Net credit for the spread is $2.40. If the trade moves against me, I could have a max loss of $7.60. It seems stupid, to risk $7.60 for $2.40, but it makes sense to me today.

LinkedIn: This is probably the most overpriced stock in the continent, trading at 140 times forward earning. It’s almost a gift that stock has gained $8 in two days. Stock is trading today above $80. I am buying a put spread by buying February, $77.50 calls and selling $70 calls for net debit of $1.90. My max loss will be $1.90 and max profit will be $5.60.  Earnings are due on February 9^th. Stock had an excellent run and I don’t see upside potential even if there is a positive earnings surprise. Stock is in a down ward channel and has reached the resistance line.

                                      Chart courtesy: Finviz.com