Mar 2011 Earnings Season

Mar 2011 Earnings Season

Earnings starts on Monday with Alcoa Inc.(AA), Wednesday Has JPMorgan
Chase & Co.(JPM),  Thursday has the heavy weight Google (GOOG),
Friday has Bank of America (BAC).  This earnings should determine the
direction of the market until the end of QE2 in June.  I actively Trade
AAPL, BIDU, BA, GOOG, V, CAT, SNDK, NVDA, F, ISRG and I will be posting
some of my trades over the next week or so to demonstrate the need for
protection and how I sleep at nigh twhen trading large sums of money.  I
will attempt to demonstrate the risk involved and how I use options to
hedge risk like the large hedge funds manager should do.  What a bummer
people use money managers who don’t !!!
Let me start with screen shot of GOOGLE

bought 500 shares of GOOG around March 18th at an even $565.  My risk
in purchasing just stock ownership is EVERY PENNY  I have invested in
stock.  Google could go out of business and become the next Bear
Stearns.  Probably not likely but  they could lose half their value if
something were to be discovered like falsifying profits or mismanagement
of their books. 

Risk in my trade is $565 per share * 500 shares = $282,500
To lower my risk I bought the right to sell my stock @ 275 for a cost of $22.49 – The long put option
My new cost basis = $565 stock price + $22.49 Put Option Price = $587.49

What is my new risk in the trade?!?!?!????  IF you said $587.49 per share or $293,745 you are wrong !!!
new risk per share is $587.49 – $575 = $12.49 I bought the right to
sell GOOG between now and the third Friday in May for $575.  ANYTIME
between now and then I can have my broker sell my stock even if it is
trading down at $350 per share.  My Risk is a total of $12.49 * 500 =
$6,245 or 2.1% of Total Invested Capital

Anyone willing to cap some “potential profit” to lower the risk even more?!?!??? I AM !!!
would be more than willing to sell my stock at $650 a share.  It
technically shouldn’t get past that price but you never know.  I am
willing to sell my stock @ $650 between now and the third Friday in June
for a nice profit.  The best part is someone or some broker pays me
$4.54 a share to do so.  Google might go to $700 but I am willing to cap
my potential profit to lower my risk even more.  This controls my greed
and would net me an overall profit of $67.05 per share or $33,525 –
11.5% Return on Invested Capital.  I am ok with having to sell at $650.

New risk of $12.49 per share minus $4.54 = $7.95 or only 1.4% of a total invested capital of over 291K. 
I love having money managers that trade this way.  Go to
and hit my contact page to talk or sign up for a live, one hour webinar
that shows portfolio management that actually hedges your risk !

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