Sam,
Thank you for posting for me. The volatility in Borl is probably due to options activities. Here are the incentives for MM's:
1) Spread between buy and sell for out-of-the-money (striking price of 10 for example) is between 15-25%. To make people move in and out of positions even at the same stock prices, they can make a bundle.
2) With low stock prices, it's relatively cheap and easy to short 3-4 million shares of Borl, thus, they are able to move the stock prices, and take home 100% of out-of-the-money calls. Try this crap with $40 stocks and we're talking real money even for MM's.
3) With low predictibility in earnings, Borl is a good candidate for churning at Q-results time.
4) With lots of Borl fan, it's easy to peddle call options. We are greedy and instead of buying 100 shares, instead people buy 10 out-of-the-money calls and lose it all. Then they blame the company for not coming in with good results. We are our own worst enemies.
The moral of the story is don't feed the MM's by buying call options. Instead of reducing the supply of the shares by buying outright, the money is put on the table to invite MM's to take, which in turns make these Borl fans soured on the company.
TA: The downside reversal pattern on the daily (4/21) and weekly chart is now in force, nevertheless, the uptrend is still intact on both the daily and weekly chart. The gap between 11 and 10 13/16 looks inviting for a fill and it will be filled, based on the fact that the uptrend is still valid and FA.
BTW, as a general rule: never buy options on stocks under the teens. The underlying is already low enough, and now we have examples of this rule in action with Borl. |
