Today Orient Paper (ONP) finished down almost 24% and was down over 30% for a period of time this morning. As you may remember I managed to book over 20% profit in this stock and also sold $12.50 calls for $1.15 per contract on my remaining shares back in April. ONP getting torn to shreds today allowed me to buy back all my $12.50 calls and $15 calls for .05 each booking $1.10 in profit for the $12.50 calls and .90 for the $15 contracts. I also sold $5 puts at $1.10 per contract. It would have been possible to get more, however I was greedy and placed a limit order at $1.50 and it didn't fill so I ended up chasing it down to $1.10.
This really shows the advantage an options seller has when investing in stocks. The shares I have remaining in ONP cost me $8.28/share at the end of March quickly went up 20+%, Which enabled me to sell a portion of shares for a quick profit, but more importantly sell OTM calls at a good premium. The $8.28/shares now are discounted by the $1.10/share I made for the $12.50 calls, .90/share made for the $15 calls and now $1.10/ share more for the $5 puts sold today. This brings my cost basis down to $5.18/share reducing my exposure to today's big plunge down to $5.09 and more importantly protecting the profit I made off of the portion of shares I sold after the 20% move up back in April!
Now for the even better stuff! The reason ONP went up in flames today was unsubstantiated claims made about the company by a couple of investors who bought heavy short positions just prior to making the claims. They preyed on a fear that most people investing in Chinese stocks area afraid of, inaccurate reporting of numbers in financial statements. You can read more about the story here . Looks to me that they succeeded and made a lot of money in doing so, but the large amount of volume as the stock started to recover from it's lows just before lunch time shows they are booking profits and the stock will recover. This will be a great opportunity for us to make even bigger profits when news that the claims made were unsubstantiated and the short positions are covered.
The Trade:
Sell the NOV $5 put for $1.00 or initiate a position at around the $5 level and wait for this paper airplane to soar!
Update: Might be too late if you didn't take advantage today! Just found this on a site posted 1hr ago, Orient Paper Inc (NYSE:ONP) shares jumped 19.65% in after hours trading on volume of 11,942 shares traded.
Anyone know how to verify the after hours pricing?
Verified by Yahoo finance:
Orient Paper, Inc. NEW Common S
(AMEX: ONP)
After Hours: 6.09 
1.00 (19.65%) 7:59PM EDT
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