Playing Baidu Earnings With Options

Baidu (BIDU) is a fun company. The stock has been a great performer over the years, especially for those that have owned it since the beginning. It is a play on internet, advertising and China.

Here we will discuss an idea of how to play the earnings release that is scheduled for after the bell today.

The current expected move for the stock is about $9. That puts the stock at either $65 or $83 by August’s option expiration day. The way to determine the expected move is by adding the price of the two “at the money” options together. With the stock currently trading at $74 a share we can take the $72.50 call plus the $75 put and subtract from there the $2.50 of intrinsic value and that gives us $8.75.

Here is the chart for BIDU (click to enlarge):

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