Gettin GGC

Everything in this blog and my speculating successes and failures begins with a simple gut instinct. It's going to go up - or it's going to go down. Then from that point I pull up a few different methods of analysis to see if I am on point at all. I look at the chart, I look at the sector, I look at the individual company's fundamentals - I try to identify an opportunity that others are overlooking or not allowing its full potential. This strategy has manifested itself in swing trades, value plays, momentum moves - all of the above.

The current one is a value play - this is the kind of play I have not done a lot of over the last year. The main ones that come to mind are Sandisk, The9, and also Allied Waste - with mixed results. My better results typically came from technically based trades that I was in and out of quickly for a decent price change while leveraged.

The current potential position in GGC starts with the simple bias of an upward price move based on the coming earnings report. I am not going to delve into the fundamentals and technicals too much here. I will admit that I have spent a few hours looking into this one though. Here is the relevant chart:


Here is the game plan. I think this stock will trade in 21-22 range again before earnings. The chart really looks that way to me. That means I need to be patient for the best entry point. Once the target entry zone has been reached I am going to go out on a limb on this one. I am going to commit the entire portfolio to the position - this is something that I haven't done in a long time. It is probably foolhardy- and is certainly flaunting the system rules which is a major NO-NO. Hear me out though on the approach. My plan is to leave a cash position of $10,000. I will sell three $30 put options for either May or August expiration. This will obligate me to purchase 300 shares of GGC stock at $9,000 in either May or August and regardless of the market price. In exchange for that obligation I should receive somewhere in the $1,000 to $1,800 of option premium. I plan on then taking that premium and dumping it into a bundle of May and August $30 call options.

Best case scenario - The May call options are purchasd in the $.05- $.25 range and finish in the money. The PUTS I sold expire worthless and I pocket the premiums. That would give a potential return of 1000%+.

Worst case scenario - calls expire worthless and I am stuck with 300 shares of GGC stock. I estimate a lowest possible value of $18 - which would give a portfolio value of $5,400. That would be a 50% drawdown - but I think the upside here is about 1,000% - so I am willing to take the trade off.

Stay tuned for more info on this speculation. I have not committed this much capital in a long time - it should be interesting to say the least.

Best regards,

BG