BIDU - Ready to Make New Highs?

Baidu Incorporated BIDU has been on a strong upward move as of late. We haven’t seen a real dip in this stock since the beginning of 2013. In July 2013 BIDU received an even bigger boost with a better than expected earnings report.

Now it looks like BIDU is setting up to breakout to new highs. We are a bit overbought here but the momentum behind this stock could propel it past this 170 resistance.
 

With it being overbought we don’t want to come in and just buy calls. We could see a slow down (sell off) at this resistance before it breaks out to new highs. With a clearly defined resistance and support coming up from the bottom we want to sell puts in the December expiration. This will give us a nice return and the ability to play this stock if it breaks out or if it just sits there and churns.

The options we are looking at are the 150 puts for December. The 150s will give us a support level to insure our position remains profitable. We are going to sell these puts for a .70 credit for a 5.00% return.

We probably won’t hold this play until expiration unless BIDU just takes off over 170. Ideally we would like to take it off next week and collect a majority of the credit. 

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