We had lots of fun with our BIDU trade this week but, that’s a high-stakes type of play that is not for everyone. Another example of a good way to trade stocks is BEAS, which we closed out on today’s rally but provides an excellent example of how a trade develops at PSW.
Our original call was for the December $15s for .50 back on September 14th and, as Andrew Wilkinson of IAB pointed out in Friday’s wrap-up, that’s where the action was as we rushed to take our amazing profits off the table: “Today’s unsolicited move by ever-acquisitive Oracle to buy BEA Systems for $17 per share, sent BEA stocks skyrocketing to $18.09 – well past the initial offer, and igniting rumors that a competing bid may be in the offing. With options moving at 20 times the average volume, some traders aren’t waiting for a bidding war to erupt – they’re taking profit given the spectacular rise in call-side premiums today. We believe this is what can be observed in the December 15 calls, which traded more than 11,000 times this morning, selling primarily to the bid at prices around $3.10. This may have been the closing of positions opened for $0.65 in late July, when BEA Systems shares were trading 27% lower at around $13.00. Looks like these early call buyers – not to mention shareholder Carl Icahn – cashed in handsomely in the space of two months.”
PSW Rule #1: Always sell into the initial excitement!
Here are ALL of our comments on BEAS from the beginning of the trade through the sell. It’s very interesting to go back and see how a trade takes shape on the board. Note that it’s a great team effort. This one started with a trade thrown out by me, as I noted some unusual bullish activity, which was quickly followed up by the members as we figured out why we were in the trade! Some people got out on the Sept 24th dip, getting out with a humble 400% return, while others held it through Friday’s stunning returns of 800-1,500%:
Phil – September 14th, 2007 at 3:00 pm | Permalink
BEAS something up
Phil – September 14th, 2007 at 3:02 pm | Permalink
BEAS grabbed Oct $15s for .50 – I have no idea why…
Andrew – September 14th, 2007 at 3:03 pm | Permalink
Icahn involved in BEAS.
Phil – September 14th, 2007 at 3:10 pm | Permalink
BEAS doing well, something about a deal with ADBE and something about a new licensing agreement but no facts that I see.
chubby – September 14th, 2007 at 3:11 pm | Permalink
Phil – I show BEAS Oct 15’s for .20…?
Mark – September 14th, 2007 at 3:12 pm | Permalink
BEAS – Icahn apparently owns 8.5% stake. He says a sale of BEAS to a “strategic acquirer” will max the price of the shares…
Phil – September 14th, 2007 at 3:18 pm | Permalink
BEAS – oops, sorry that was DEC $15s!!! Gotta love Icahn…
trdsfr! – September 17th, 2007 at 9:34 am | Permalink
beas clearing the stops or prep to plunge?
Phil
September 17th, 2007 at 1:25 pm | Permalink
BEAS popping again.
Andrew – September 26th, 2007 at 3:40 pm | Permalink
Carl Icahn is on Fast Money tonight. I’m sure they’ll ask him about BEAS
Cap – October 3rd, 2007 at 10:34 pm | Permalink
Found out why SHLD has run 15 points this week ….
Ackman Takes Stake in Another Large US Retalier, This Time it’s Sears (SHLD)
10-03-2007 12:45:59 PM More 13Ds Ackman Takes Stake in Another Large US Retalier, This Time it’s Sears (SHLD)
Icahn Raises Stake in BEA Systems (BEAS) to 11%
That’s two great bits of info in the same post from Cap!
MrN – October 12th, 2007 at 9:34 am | Permalink
BEAS, YES!!!!!!!!!! .2 to 3.1 in the Octobers! Out 2/3 Phil thanks!!! Holding one – should I take that money & run too!?!??
Phil – October 12th, 2007 at 10:12 am | Permalink
BEAS – no, by all means don’t take a 1,500% profit in a week. Good traders do that every day (extreme sarcasm!).
I was wrong here , by the way, I did not realize he said he already took 2/3 off, which was absolutely the correct play and let the remainder ride with a reasonable stop (or roll up).
Demetrius Michael – October 12th, 2007 at 10:24 am | Permalink
BEAS – lol wasn’t Orcl asking 17.50? as soon as I saw it opened that high I would’ve bailed.. It’s just trading on speculation of other bidders, which is risky to the max… There’s only one Alcan, and that’s Alcan.
libertarianwackjob – October 12th, 2007 at 10:30 am | Permalink
And did you see the buyout number of Oracle’s buy out of BEAS
6.66 billion 666 the number of the BEASt too bizarre!!!!!
On the whole, we took our money and ran – something about not looking a gift horse in the mouth. They don’t all go this well but, when they do, it’s important to recognize our luck as well as what a fantastic team effort it took allow us to profit from it. Congratulations everyone on another great trade!
Meanwhile, over at Wang’s World, congratulations are in order for those still in the BIIB trade! The Oct $70 calls were originally started as Oct $55s way back on 5/31 and were rolled over time to the $70s at $2.55, which should be a 5-bagger at Monday’s open as that company puts themselves on the block.
ELN may make a nice play off this news – tune in Monday, I’m sure we’ll find something to trade!
Have a nice weekend,
– Phil
