Trading Diary: Aug 27-Aug 31

by Enis September 3, 2012 6:31 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed or expired in the week that was Aug 27th to August 31st:  

Monday Aug 27th:

We were reluctant to force trades in a quiet market ahead of the heavy macro calendar in the first 2 weeks of September, so we stayed away from getting involved on Monday and Tuesday of last week.  I laid out a potential future trade that I had on my radar in LULU ahead of the earnings date in September, but I wanted to wait until closer to the earnings date in case the stock moved enough that I would prefer different strikes.

Tuesday Aug 28th:

Dan previewed JOY earnings, but again stayed away from forcing a trade.  A number of stocks have reported disappointing results only to rally pre-market or on the open after the earnings report (CRM and TIF could be included in this group as well), and JOY behaved similarly after weak results.  Chinese markets and Chinese related names have shown relative weakness compared to other markets, and we expect to maintain our view on this longer-term theme.


Wednesday Aug 29th:

ACTION:  DELL ($10.93) Sold to close the Sept / Oct 11 Put Calendar at $0.18 for a .09 gain

Dan:   For all intents and purposes, this was always a little trade.  While the profit potential was never going to be large, the opportunity to make a small profit with calendars into DELL’s Q3 report had a high probability of success, I just needed to get the direction right.  After previewing the quarter, it became apparent to me that the near term fundamentals were very unlikely to be the catalyst to take the stock higher, so I bought a Put Calendar, choosing the strike in line with the implied move.  Last week, as the stock went through the strike of the spread, I took the trade off for a double, and thus a small profit, I didn’t risk much, and didn’t make much, but I liked the potential odds of success.  Read here.


ACTION:  GRPN ($4.35) Sold to close the Jan13 6 / 4 1×2 put spread at $0.45 for a .24 gain.

Enis:  This was a trade that I initiated ahead of GRPN earnings as a very favorable risk/reward setup on the up, down, and flat scenarios.  I had been offering the 1×2 put spread for 0.50 ever since GRPN reported and sold off below the $6 level, but was tired of spending mental energy trying to get filled on this order, so decided to hit the bid at $0.45, take my $0.24 gain, and move on to other potential trades.  Since the 1×2 put spread is in Jan13, the 4 strike puts that I was short won’t decay much for another couple of months, and I did not feel comfortable sitting on the structure for that long.  Read here.


Thursday Aug 30th:

TRADE: COH ($57.50) Bought the Nov 55 / 45 put spread for $2.60

Enis:  COH is a stock that has tipped its hand with extreme weakness from its highs this spring (down 40% at its lows), and has since recovered somewhat on general market strength.  The story feels broken for at least the next year, with the CEO acknowledging as much in the Q2 earnings release on Jul 31st.  As a result, any bounces not tied to company-specific news should likely be treated with skepticism.  In the retail space, when a certain brand starts to lose its luster, the premium valuation is rapidly lost.  Competition from KORS has knocked COH from its previous perch, and a 1-2 year reboot are likely needed to recapture its brand value in the eyes of consumers.  I traded a Nov put spread to include the next earnings release, which is I am thinking is too soon to show demonstrable signs of change. Read here.

Friday Aug 31st:

TRADE: FB ($18.18) Bought the Nov / Jan13 22 call calendar for $0.45

Dan:  This trade that I detailed Friday night on Options Action (below, about 3 minutes in), should not be misconstrued as an outright Bullish trade.  The trade set up is more from a technical standpoint as the market anticipates two very large lockup expirations of insider shares in Oct and Nov.  My premise very simply is that this overhang will likely cause the stock to stay depressed until the lockup is out of the way, but after such time the shares could see a bit of a relief rally into January as some investors look to play for a new year rally in the shares.  Read here.