Tuesday, May 13, 2008

Blackstone - A Solid Short and A Solid Buy

The title sounds a bit confusing I know, but it really sums up the position the stock is currently in.

BX offers a solid candidate to sell short or buy puts and after the soon to come decline will offer a solid buy for a strong move higher.

Take a look at the chart below and see what I am referring to.

For those who want to trade put options on BX, you need to give yourself enough time for the stock to reach its downside target. This means going out to June at least as May options are in their final week of life and should be avoided unless a day trade is the point of order.

Currently the June 20 Puts are trading at 1.85/1.90 and offer the best buy based on risk reward.

Remember to always use a protective stop on all of your option trades. There may be times that you have to use a mental stop because the options could be open to manipulation by market makers and they are well know for looking for stops and moving the Bid/Ask down to those levels whether the stock moves or not. I realize that this is something that seems a bit on the shady side, but it is part of the options game and a part that you need to be aware of.

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