Sina, The Google Of China, Hmm, Reminds Me of a Trade….

• Posted by Greg Harmon
• on May 11th, 2011

Sina (ticker: $SINA) has been a high flying stock, not unlike Google (ticker: $GOOG), and has recently turned lower, also not unlike Google. This is not surprising as Sina is known as the Google of China. Well actually the Twitter of China I am told, but I can dream. The analogy brought to mind another similarity to Google from a recent trade idea about how to play it for short exposure with little to no risk (link below). Let’s start with the chart.

Sina has had a strong and steady rise from the bottom of 32.00 in May of 2010 to the peak at 147.12 on April 19. It is now in a downtrend but finding support at the 23.6% Fibonacci retracement level at 119.95. Should it break through then there is support at 110.97, the 38.2% Fibonacci level at 103.14 and then near 95. With the red Marubozu print Tuesday it seems like a lock to head lower still, but it reports earnings after the bell Wednesday night. So using the support levels above we can devise a trade to capture downward price action post earnings without risk if the stock moves higher. Here is where the Google trade comes in. Below is the options chain for Sina from the close on Tuesday.

Using the June expiry options you can pick up some short exposure and be paid to do it using a 1×2 split ratio spread.
Trade Idea: Long June 115 Strike and short June 110 Strike and June 100 Strike Puts.
Based on the last quotes for Sina options for Tuesday this trade would generate a 65 cent credit per ratio traded. It offers downside exposure should Sina finish anywhere between 115 and 95 on June 17 with a maximum profit of $5.00 between 110 and 100. This trade does require margin, $1290 per ratio at Interactive Brokers, but if it expires worthless this is a 43% annualized return on your margin used for the six weeks to expiry. There is also risk involved as if Sina closes below 100 on June 17 you would be put the stock with a basis of 94.35, below the 100 day Simple Moving Average (SMA).

This type of trade can be a good way to gain targeted short side exposure in a range with no upside risk.

Playing Google on the Short Side for No Risk*

Want to see how it actually how it actually played out for Google? Click Here.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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