BIDU Bullish

Here we are on a Daily chart that is 9 months out. If we just draw simple trend lines, $500 is the target. Today seems to be a hesitation day after such a big day yesterday and the gap up the day before. The face that on Tuesday its low was $384.66 and today it's trading in the $466 area, $82 move in 3 days is excellent. That's over a 20% increase just this week in price action.

You're not supposed to fall in love with stocks, but BIDU has served me well in the past. It has delicious patterns and big movements. You don't have to trade more than 1-2 contracts to make some decent money because of the moves. This beats those $1 options in the Qs where you have to buy LOTS of contracts to make money. The more contracts you buy, the more you give up in commissions.

Depending upon your broker, 1-2 contracts is fairly cheap as opposed to 10-20 contracts (for the Qs). With TOS, it costs me $2-4 roundtrip for BIDU or $20-40 for the Qs roundtrip.

I'm just going to refresh my memory on trading options by starting with BIDU. It's good to use a stock that moves to practice on. This is all on paper, of course. I got in today for FEB450C - 2 @ 36.30. The price was about 467. My target is 500. If it reaches that, even if all the time value (the extrinsic value of the option) is sucked out, my option will still be $50, which is more than what I paid for it. The $50 would be the ITM (in the money portion of the option which option makers cannot screw with).

What would've happened say we got in yesterday instead? Yes, we would've missed the gap up on Wednesday (the 13th), but we wanted to confirm that the stock was still headed up. Say we got in at 8:30 am MST (10:30 am EST) @ 447 for the 2FEB450C. They were $24.20 (I chose the worst case price). 447 is close to ATM, however, all the price of the option is still extrinsic, meaning, all time value.

As I look right now, the ATM options, FEB470C are trading about $25.20 (worst case) with the stock price at $467. Still close.

Today the Feb450C are worth $35.80 (worst case) as I write this at 12:08 pm MST (2:08 pm MST). The price of the stock has risen nearly $20 from yesterday @ $447 to now $467, however, the option has gone up only $12. That means that $8 of the time value got sucked out of it from yesterday 8:30 am to noon the next day. Wow!!! Can you hear the sucking sound?

Today, I'm $17 ITM, which is good. However, if the option went to zero today (it won't because these are Feb options, I'd still lose $19 on my options. Not a good way to make money.

Let's say I hold the options for 2 weeks and sell the last Friday of this month and it does reach $500. The option would most likely be around $55 ($50 ITM and $5 TV). Yes, I would be gaining $19 profit, but in that 2 weeks, there is only $5 left in TV (time value). What a rip. Remember, if we got in on the 14th, that would've been $24 for the option ($24 TV). $19 got sucked out in 2 weeks.

I'm having to relearn another trading platform as I hadn't used it in awhile. Lots of platform learning today.

Another thing I will have to test is to see if my trading strategy works on specific options (i.e., Feb480C). In TOS, the name of the option is under OPRA. If you type the option name instead of the stock symbol, it will give you the chart of that particular option.
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