BAIDU, HSBC going down.

Last week I sold the BAIDU $120 JAN 17th PUT OPTIONS just a couple of days before they expired for a tidy sum. I averaged approximately 50%. Option contracts expire on the third friday of every month. My goal was to only trade them. I had no intentions of exercising them even if they were ‘in the money’. However, I believe there is still more room. The stock hasn’t reached my ultimate goal of somewhere between $75 and $80. The stock currently sits around $111 today.

Shortly after, I bought some HSBC $35 FEB 21st PUT OPTIONS. When I heard that this week would be the beginning of earnings releases combined with the current economic crisis, I figured that the financials would take another big hit along with everything else.

Another reason I chose this bank stock instead of the other american bank stocks is that HSBC’s price was still around $42. Many of the large american institutions have already fallen into the twenties and well below. The $35 FEB21 PUT OPTION’s were very conservatively or cheaply priced at $1.85 per contract. After todays dramatic drop, the option contract has more than doubled in value returning over 126% since last thursday. There is still much more room for this stock to drop as HSBC has arms in every major economic country that is being hit hard right now. The eventual target is expected to be somewhere in the low twenties or high teens.

The markets started dropping overnight in Asia all thanks to the Royal Bank of Scotland’s earnings release which showed a loss of $28 billion pounds. This whole week will be a continuous stream of poor earnings announcements from large financial institutions and tech companies.

• Bank of America to post first loss in its history and is proposing another 4000 in layoffs.
• CitiGroup earnings to drop significantly.
• HSBC was recommended a ‘SELL’ on monday.
• Nortel filed for bankruptcy last week.
• Google drops Ad placement program.
• Regional Financial Corp sees over $6 billion in 4th quarter losses.
• Intel cuts prices of its processors.
• State Street reports significantly higher losses.
• Wells Fargo drops on earnings fears.
• Merrill Lynch loses 15 billion.
• Circuit City went bankrupt last week.

I don’t think I’ll bother listing all the others. Oh and I almost forgot. Congradulations Obama. Enjoy the party today while it lasts. You’ve got a huge job in front of you.