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Strategies & Market Trends : Gersh's Option trades -- Ignore unavailable to you. Want to Upgrade?

To: Mark Johnson who wrote (630)	1/28/2008 7:31:26 PM
From: Mark Johnson	Read Replies (1) \| Respond to of 652

Here is an idea for the investor or trader, not for the weak at heart. I will admit that it is a speculative one. This is one direct way to play the growth going on in China which is Baidu.com (BIDU). No need to explain what they do, they are a leading Chineese Search engine/portal, sort of like Google but in China. It's stock went from a high of around $430 a few months back and recently hit a low of $237 a share and are now back up to the $291 area, where it is right now. All of the weak holders sold out. I think in a couple years the shares will be up to the $500 range. This stock is all over the map and is not for the faint of heart. The company is experiencing tremendous growth. As of right now Bidu has about 5.2% of all online searchs Worldwide fool.com as the Chineese internet search market grows, so will the growth of their internet users. If you want to diversify some of the risk you can sell a covered call. An idea is the January, 500 call strike price of the 2009 options, bidding $27.90. The downside is that you have to sell the stock at $500, even if it goes to $600 per share. This is one way to diversify the risk and you get an up front $27.9 per share or an instant 9.58% return on your money. If there is a full blown world wide recession and Bidu.com goes down to the $200 range, yes you will lose money but you diversified your loss and you will lose about 24% ($291 original price - 27.9 points you keep from selling the jan 2009 $500 covered call = [263 initial cost] , or $63 loss divided by purchase price of $263 assuming stock goes to $200 = about 24% loss. If Bidu.com goes lower, of course the loss would be alot worse. Overall I think the risk is worth the reward but this is not something you throw everything into. Only invest what you can afford to lose but if you are in it for the long haul, I really think long term investors will profit most with a 2 year hold time frame with this investment.