CYOU Reports
Strong Numbers, But SOHU Drags
PLAY: Sell your CYOU February 33 Puts (O:CYOU 10N33.00) at market, good for the day. Hold your CYOU February 35 Calls (O:CYOU 10B35.00).
Dear Bottarelli Research Member,
Good morning. As we all get used to the new option symbols, our earnings play on the Chinese game sector is offering mixed signals. First of all, China’s number two Internet portal company, Sohu.com (SOHU – NASDAQ), posted a sharp drop in quarterly net profit. This is causing SOHU to drop, and it’s taking Changyou with it. After all, Changeyou (which was a SOHO spinoff, as I mentioned before) makes up more than half of Sohu’s total revenue. But looking specifically at Changyou, they posted a 21% increase in fourth-quarter revenue to $70.7 million. This is complicating the directional bias. SOHU is weak while CYOU appears strong. Based on this situation, let’s use the opening weakness to sell our CYOU February 33 Puts (O:CYOU 10N33.00) and hold the calls for a bounce. Here’s the play…
PLAY: Sell your CYOU February 33 Puts (O:CYOU 10N33.00) at market, good for the day. Hold your CYOU February 35 Calls (O:CYOU 10B35.00).
And a always…
Lock and load!
Sincerely,
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