Andrew Wilkinson 01.16.10 Baidu Bulls Hit The Options Hard

Baidu Bulls Hit The Options Hard
Andrew Wilkinson, Interactive Brokers, 01.16.10, 11:05 AM EST
Buying call options on Baidu has created life-changing wealth in the past year for some investors. The fervor for shares is still strong.





Today's Tickers: S, BIDU, PFE, FXE and AA

Baidu ( BIDU - news - people ): Bullish investors continue to trade January contract calls and puts on the Chinese language Internet search provider today even with expiration close at hand. News reports today indicate some at Credit Suisse ( CS - news - people ) anticipate Google ( GOOG - news - people ) may exit the Chinese market as soon as February. Di*****anding Google operations in China could allow Baidu to swoop in and procure one-third of the U.S. company's market share there. Shares of BIDU traded 0.75% higher to $467.86 around noon Friday.

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Yahoo! BuzzBaidu bulls bought roughly 3,200 calls at the January $470 strike for an average premium of $2.08 apiece. These contracts will expire out-of-the-money and worthless unless shares rally above the $470 level. Investors long the calls break even if the stock rallies up to $472.08 before the contracts expire. Additional buying interest appeared as high as the January $480 strike, where 2,000 calls were picked up for an average premium of 48 cents per contract. Perhaps traders buying these out-of-the-money contracts hope to enjoy short-swing profits by selling the lots by the end of the day for more than the average premium paid.

Optimism is apparent on the put side as well. Investors sold 3,400 puts at the January $460 strike to take in premium of $2.35 each. Another 1,900 puts were shed at the in-the-money January $470 strike for an average premium of $5.85 per contract. In-the-money put sellers are happy to have shares of the underlying stock put to them at an effective price of $464.15 each if BIDU's share price trades below the $470 strike price through expiration.

Jim Oberweis told his subscribers to buy Baidu at $79 and told them to buy more at $110 in early 2009. Click here for Oberweis' current advice and access to the complete model portfolio in the Oberweis Report.