Trading Diary Sept 4th – 7th

by Dan September 9, 2012 8:37 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed or expired in the week that was Sept 4th to Sept 7th:

The first couple days of the holiday shortened week, felt like summer had never truly ended.  Volume was anemic, while volatility non-existent. Draghi’s press conference Thursday morning, while fairly well telegraphed, caught shorts offsides, and served as the impetus to cause the SPX to make new 4 year highs, and the Nasdaq make new 12 year highs, while closing at the highs of the day about about 2%.  Friday’s generally sideways action (SPX up small and the Nasdaq flat) served as a consolidation day as investors digested worse than expected employment data, strengthening the case for further QE at the FOMC’s 2 day meeting starting this Wednesday.  Our trading was light on the week as we waited for the market’s reaction to the ECB’s plan to “save the Eurozone”, which we were positioned for incorrectly.  We feel very strongly that the reasons for our short bias are sound, and will ultimately prove correct in the months to come, but in the meantime, “fighting the fed” has been less than profitable, so we will avoid compounding our problems until central bank action is in the rear view mirror and investors once again focus on the lack of real growth the world over.  


Tuesday Sept 4th:

Action: Sold to Close 1/2 of my INTC ($24.32)  Sept 25/23/21 Put Fly at .68 for a .40 gain

Dan:  Short the PC supply chain has been a theme that we have been all over for the better part of 2012.  We are firmly in the camp that the proliferation of Tablet computers is going to decimate PC margins and cannibalize the category.  Those component suppliers who are not well exposed to this obvious secular trend will have a tough couple of years as they transition to the new world order in pc computing.  INTC is tops of the list who are a bit behind the eight-ball in mobile computing, and despite it’s strong balance sheet, nearly 4% dividend yield and low valuation it will remain one of our favorite technology shorts.  With the stock approaching the mid point of my Put Fly I took off half of this position for more than a double.  Read here


Wednesday Sept 5th:

NEW TRADE: PG ($67.38) Bought Jan13 65/60 Put Spread for 1.15

Dan:  Once we get the central banks “juice-fest” out of the way, I think investors will once again focus on the lack of growth the world over. Companies like PG who get a good bit of their sales from over seas, and rely on emerging markets such as China and Brazil for future growth are likely to see investors lose patience in the near-term as China heads for a hard landing causing what I think very possibly could be a global recession in 2013.  Investors including activists have flocked to the name since mid-July creating what I feel is an artificial rally not predicated on anything fundamental.   Read here


Thursday Sept 6th:

No trades.


Friday Sept 7th:

Action: Sold to Close Second 1/2 of my INTC ($24.12)  Sept 25/23/21 Put Fly at .72 for a .44 gain

Dan:  INTC finally pre-announced their Q3 well below their previous revenue guidance, and while the news was not unexpected, investors spent the day pressuring the stock to levels that place it down on the year and closing at 8 month lows after being up almost 20% at one point in the Spring.  With the stock holding a fairly important technical level of $24, I decided to take profits on the news and look for a different entry point to press the short.  Read here

NEW TRADE: AAPL ($682) Bought Sept22nd/Oct 700 Call Spread for 10.50

Dan: Looking at the expectations for AAPL’s highly anticipated iPhone launch event on Wednesday, I can’t possibly contemplate a situation where I can see buying the stock ahead of the event, at all time highs would be a prudent thing to do.  Sure the company could finally announce a truly innovative smartphone for the first time in years and the stock could go parabolic, but that is not my game.  If it is yours, have a ball, buy some out of the money calls or call spreads, define your risk and risk what you are willing to lose.  As some readers have reminded me, sometimes I have a tendency to over think fairly simple situations, and maybe I am doing that again in this trade, but calendars lined up fairly well given the flat term structure and my belief that AAPL could sell off after Wednesday’s event, and then set up as a decent long into the little known but often rumored Oct iPad “Mini” event.  Read here