BBY & BIDU Post Earnings
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BBY & BIDU Post Earnings

Henry Gambell - February 26, 2016

Good evening everyone, this is Henry Gambell with, and in today's free video, I want to spend a little bit of time reviewing BBY from last night, then giving you some insight, or at least the way I'm approaching BIDU for tomorrow.

So for Best Buy, we spoke about the unbalanced flies and how they gave us the most reward if the underlying would open up flat, if it rolled over, that worked out great and the only real risk was to the upside. Well, right at the open we did have a profit on this, as you wanted to take it you could have. I was giving it a little bit of time to trade into the end of the day, and obviously it closed fairly strong.

The thing that I'm gonna be looking at tomorrow, and in a perfect world, what I would like to see happen is that there is still a good amount of open interest here in these call options. Generally speaking, that large amount of open interest is something that I would look to expire worthless. That's part of why I initiated the trade on it yesterday. There obviously is still a very almost perfect expected move into it tomorrow, so if we're able to fall $0.70, that would leave me right at 3150. In a perfect world, the way you manage this is, just let the 31-half calls expire worthless, you sell the 29 half's for as good of a credit as you can, and then that's the way to wrap up the trade. Obviously, if you close at $31.51, you need to make sure that you get out of those short options, and that's what I'll be watching for tomorrow.

So that one was pretty straightforward and fairly easy to manage. Baidu, I don't know if it's going to be quite as exciting. I was looking at this in the chatroom today into the close, and I was playing it to the short side. Obviously that is not going to work out as Baidu is trading up here. We look at it on the intraday chart, trading right around 180 for the extended session high, and as we sit right here, right around 176. So the thing that I'm looking at here, I did another unbalanced fly. They had more of a bearish take on it.

So I've got about $600 of risk out there. What I need to do, or what I am doing, is looking at the idea that on this bounce, what was our expected move. Well, right here in ThinkorSwim, you can do the at-the-money straddle. You can look at the expected move here. They're all about the same thing. But the expected move was right around $13. So $13, we're up about, just over, trading at 176. It's a little through it, but the point that I'm trying to make here is that you're not getting radically outside of the expected move. You're pretty much inside that range.

Okay. Knowing that that was the move market makers were expecting, and then also coming to the daily chart, and noting how your 100 and 200 day moving averages have an almost perfect confluence of resistance at exactly that price point. That tells me that I think this is an area that will be defended tomorrow, and potentially an area to sell call spreads against. We can do the 175's if we want to be aggressive, or try to do the 180, 185 if you'd like to be a little more conservative, and try to work it around that resistance. That's the way that I'll be looking to manage that butterfly that will be in the money.

So, I hope that helps. That's part of what I've got going on tomorrow. Also, I want to make sure you guys were aware of the next webinar we're going to be doing with John. This is going to be Tuesday, March 1st, at 7 p.m. Central.

He'll cover some of the best strategies to use in this extremely volatile market. John has been doing well with them. So if that interests you, you can sign up at the end of this video. I hope to see you there.