Trading Diary: July 9th – July 13th

by Dan July 15, 2012 8:11 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed or expired in the week that was July 9th to July 13th:  

Monday July 9th:

Trade: QQQ ($63.93) Bought the Aug 63/60 Put Spread for .70

With the intent of culling down single stock positions expressed with long July premium in my trading book, I started last week with the intent of replacing some of my short exposure with some longer dated (Aug) broad Tech exposure (here).  Using the QQQ where more than 40% of the index is 5 of the top weighted names, I like the concentration, but I also like the fact that the very names that make up that exposure have driven much of the index’s ytd performance, and if the earnings weakness we have seen so far becomes more than just a negative near term trend, this index could be unchanged on the year very quickly.  Dan


Tuesday July 10th:

Action: IBM Sold Second 1/2 July 190/180 Put Spread at 3.50  (stock ref 187.80).

IBM put spreads had been a core short position in my trading portfolio over the last couple months, primarily predicated on the belief that enterprise tech spending is slowing, and the continuation of Europe’s Sovereign debt crisis, and slowing growth in Emerging Markets would hit large Tech U.S. multinationals at some point in the second qtr.  I traded this thesis in 2 different Put Spreads, with the last (here), averaging in and trading around the position 3 times.  Dan

HOG ($47.30) Bought the Aug 45/40 Put Spread for .95

In a fairly undisciplined trading move, I rolled into an Aug Put Spread while still losing on the July 44/40 Put Spread that I bought a couple weeks earlier.  The stock was up almost 4% on Tuesday on what appeared to be a fairly insignificant brokerage reiteration by a brokerage firm that I have never heard of.  I used the strength to roll out to Aug, as my conviction on the short thesis had not changed, with an eye of salvaging what premium I could in July when the stock sold off. Read (here).  Dan

AXP ($58.49) Bought the July 57.50 / 55 Put Spread for .45

Extrapolating from Enis’s chart of the day on Tuesday (here) I wanted to express a view that the weakness in heigh end retailers will eventually make it’s way to the issuer of Charge cards that seem to have a nice following amongst high end consumers. Read here.  Dan

C ($26.07) Sold Balance of the July 28/25 Put Spread at 1.73 for a 1.03  gain.

With July expiration quickly approaching and Citi trading closer to my short strike than my long strike of the spread, I wanted to take more than the double that I had on the position as we headed into JPM and WFC‘s Q2 earnings’ reports on Friday. Read here.  Dan

JPM ($34.10) Sold the July 32/28 Put Spread at .26 for a .50 loss.

IN an effort to do a better job with losers, meaning identifying that the risk reward of break-even is becoming increasingly less likely, I took the loss rather than to risk the remaining premium in this July Put Spread.  The intent was obviously to look for a better risk/reward trade which even with getting JPM’s direction wrong after Friday’s earnings, I did in fact have a higher likelihood of success by closing this spread for the a .50 loss and moving the remaining premium into a higher strike Put Spread. Read here.  Dan


Wednesday July 11th:

GMCR ($21.25) Bought to Close Sept 18/16 Put Spread for .55

This was a case of taking profits when we have them on a trade that had started to make me nervous given the bad start to the week in GMCR after touching the $25 level last week.  I never had much conviction that GMCR could sustain a big rally given the headwinds, but rather wanted to fade the extreme weakness in June.  With that view in tact, I decided to move on from this trade.  Read here.  Enis

HOG ($45.60) Sold the July 44/40 Put Spread at .43 for a .42 loss.

After buying the Aug Put Spread on Tuesday, I wanted to wait for a sell off to get a bit more premium out of the July Spread that was looking increasingly difficult to break-even on.  With the stock down about 7% in 2 days, I took the opportunity to close the July Put Spread for about a 50% loss, but as I had averaged in with the Aug Put Spread, My loss was about covered.  Read here.  Dan

Thursday July 12th:

JPM ($34.32)  Bought the July Regular 33/31 Put Spread for .35

After closing the Citi July Put Spread for a nice gain earlier in the week and closing the JPM July Put Spread for a loss, I wanted to press the short as I did not feel that the outlook for the balance of the year would be sufficient to keep JPM’s stock trading 15% above the stock’s lows made in early June.  While we have been wrong on direction for the last month, we feel fairly well convicted that Jamie Dimon’s ability to woo Wall Street Analysts, the Media and Investors with his public chest pounding won’t be enough once the second half earnings picture is revealed for what it will be, POOR. Read here.  Dan

ORLY ($91.30) Bought the August 90 put at 3.10

I had little intention of getting involved in ORLY, but I felt like the market gave us a very favorable entry on a name that has shown extreme volatility in the last month.  This is the type of situation that is particularly conducive to buying options, and it’s why I used an outright put as opposed to a put spread.  Read here.  Enis

HOG ($43.38) Sold 1/2 the Aug 45/40 Put Spread at 2.05 for a 1.10 gain on half.

With HOG down about 8% in 2 days I wanted to lock in some gains with more than a double on the Aug Put Spread in just 2 days, which would help make up for some of the losses in the July Spread that I closed on Wednesday. Read here.  Dan

INTC ($24.78) Sold 2nd Half of the July 26/25 Put Spread at .70,  My avg sale price was .56 or 3x what I paid last week.

While this was a bit of a “cute” trade as I chose to Buy only a $1 wide July spread the day before July 4th, I had pretty nice gains in a very short time so with the stock down almost 8% in a week I wanted to take the gains and look for a better entry point prior to this weeks Q2 earnings report. Read here.  Dan


Friday July 13th:

MS ($14.05) Bought August 13/11 put spread for 0.30

I have little confidence in the recent rally in the investment banks given the global growth headwinds and the continued weakness of European banks.  August volatility is quite cheap given that it captures earnings and the general macro backdrop, and steep August skew made a put spread the most appropriate structure in my view.  Read Here. Enis

GE (19.81), bought back the Aug 17 puts for 0.05.

With earnings this week, and given the general weakness in other industrials, I wanted to take off the lower strike puts for a nickel.  If we do see an earnings miss or a weak outlook, sub-17 could be in the cards for GE in the next month.  Read here. Enis

Original Trade June 22nd, 2012  

GE ($19.76) Bought the Aug 19 / 17 Put Spread for 0.30