Option Investor

New Position

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NTES - NetEase.com $41.19

NetEase.com (NASDAQ:NTES), through its subsidiaries
and contracts with affiliates, Guangzhou NetEase,
Guangyitong Advertising, Ling Yi and their respective
shareholders, operates an interactive online and
wireless community in China. NetEase.com is also a
provider of Chinese language content and services
through its online games, wireless services and web
portal businesses.

The company generates revenues from fees charged
to users of online, wireless other fee-based premium
services, as well as from selling advertisements on the
NetEase web-sites. Its basic service offerings on the
sites are available without charge to users and these
products are centered around three core categories;
content, community & communication, and commerce.

This issue emerged near the top of a number of scans
for (technically) "bearish" stocks and with the recent
selling activity among China-based Internet shares,
the trend appears likely to continue in the near-term.
At the same time, the issue is somewhat oversold and
a favorable quarterly profit report (next week?) could
renew investor interest in the company. With that risk
in mind, we are going to target a slightly higher credit
in the position initially (to capitalize on any short-term
rebound) and we will plan to use a "covering" order on
the stock to reduce the potential losses from a large,
unexpected change in its share value.

Fundamentals: http://finance.yahoo.com/q/ks?s=NTES&quicken=2

Chart: http://finance.yahoo.com/q/bc?s=NTES&t=6m

PLAY (conservative - bearish/credit spread):

BUY CALL MAR-55.00 NQG-CK OI=4986 ASK=$0.45
SELL CALL MAR-50.00 NQG-CJ OI=10550 BID=$0.90


POTENTIAL PROFIT (X 5 contracts) = $275
COST BASIS = $50.55
LOSS-LIMIT/EXIT POINT = $48.50 (cons) - $49.75 (aggr)

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