ONP Pounded to Pulp

Another negative report, from someone with a disclosed short position, further perpetuating the fraud rumor concerning ONP was published today the the stock reacted and finished down just over 11%. This tug of war between people publishing negative stories while shorting the stock and those taking long positions and publishing counter reports is making ONP a volatile stock to own.

I have made enough trading ONP's ups and downs for the past year that remaining invested in the long and short end of ONP is still worthwhile for me as an investor. If you are in the same boat as me you should keep playing along on this one as the volatility can create huge profits for us on the way up as well as the way down. If you are not in the same position, have just started a position, or have only lost money with ONP with the huge volatility I suggest that you stay clear of this stock in all forms until the smoke clears. Investing in this one with only hope will cost you.

So with all this said if you are still on the same boat with me playing the volatility of ONP to make huge gains read on.

It has been very simple with options to keep churning money out of this one. A day like today we sell OTM puts, buy a small portion of shares and when we get a pop upwards we cover the puts, sell covered calls against the stock we bought, and OTM calls. Going forward I think we need to be a little more cautious until the fraud situation is cleared up. Since we have already made money on this one it is prudent to limit our losses on selling puts by selling small OTM spreads. We also should refrain from adding any more shares for now on the huge dips.

What if this fraud report has some truth to it? The shares will get slaughtered and return to the $2-$3 level that I started buying and selling at about a year ago.

What if the fraud report is found to be false and they report blow out numbers again? The shares will climb back to the $10-$12 level.

With this valuation in mind we are looking at 50% gain or loss potential. This stock once considered a great earnings growth play has been reduced to a pure speculative play by these reports and should be treated as such. If you have other speculative plays in your portfolio, particularly Chinese, it is time to cut the cord on one of them.