Trading Diary Nov 5th – Nov 9th

by Dan November 11, 2012 8:00 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Nov 5th to Nov 6th:  

Monday Nov 5th:  

TRADE: QCOM ($60.30) Bought the Nov / Jan13 57.5 put calendar for $1.04

Enis:  This was mainly a bet on volatility, as Jan13 implied volatility simply looked too low, particularly ahead of an earnings event (relative to November).  I decided to trade a put calendar as opposed to a call calendar because of the broader macro weakness in the market.  The stock is up about 2% from where I initiated the trade, but the calendar is unchanged, as most of the value in the November puts has been lost.  I will probably take the trade off on a move by QCOM below $60.

Read here

Action: Sold to Open YHOO ($17.24) Dec 18 Call at .22
New Position: Long YHOO ($17.24) Jan2013 17.50 / Dec 18 Call Spread for .17

Dan:  YHOO has had a great run of late, bucking tends in tech and the broad market alike making new 52 week highs.  With the stock up nearly 8% since buying Jan 17.50 calls more than a month ago, I took the opportunity to sell Dec 18 calls to make a diagonal calendar call spread.  My hope now is that YHOO closes below 18 on Dec expiration, so I collect the premium and Dec and thus lower my break-even in Jan.  Read here



Tuesday Nov 6th:

New Trade: SPY ($143.11 ) Bought Nov17th 142 Puts for 1.22

Dan:  There was nothing fancy here, with the SPX up nearly 1% hours before the polls closed on election day, I felt that the price action was not accurately representing the strong likelihood of an Obama victory and that realization in the next 15-24 hours would be met with investor disappointment.  My intent was to define my risk with the purchase of short dated outright puts and on market weakness spread long puts into a vertical put spread.  Read here

Action:  Sold to Close WFM ($97.81) the Nov 95/85/75 Put Butterfly at 1.75 for a .10  loss.

Dan:  This was a tough trade as WFM had not done a whole heck of lot in the month since initiating the bearish butterfly, yet the options structure was nearly worth what I paid as the stocks anticipation of a potentially volatile earnings event had kept the near the money vol well bid and offset the time decay.  SO I had a dilema heading into the earnings event, hold onto the position and risk most or all of the premium on a rally in the stock , a sideways move, or a move below the implied move. The only way I would break-even on make money would be for an outsized move lower.  There was one scenario that really made money, as the Butterfly was in Nov and will quickly lose value under most scenarios.  I decided without strong conviction about a miss that I would take the position off for a ten cent loss.  Read here



Wednesday Nov 7th:

Action: Sold the SPY Nov 140 Put at $1.22 to turn my long Nov 142 put into a long Nov 142 / 140 Put Spread for no cost

Read here



Thursday Nov 8th:

New Trade: VIX (18.60) Bought Nov 20 / 25 call spread for 0.80

Enis:  I was a bit early on this trade, but I stand by its merits.  VIX was bizarrely weak in the second half of the week, despite the fact that the SPX index has moved more than 1% on 5 of the last 10 trading days, and even Friday’s price action involved an intraday range of almost 25 points.  The market is clearly much more jittery than it has been since June (and the increased realized volatility actually started in the second half of October), so I think the VIX has some catching up to do to the SPX selloff.  I will likely get out of the spread on the next fast move higher in the VIX.

Read here

Action: Sold to Close GS ($116.30) Nov 115/110 Put Spread at 1.15 for a profit of .50

Dan:  As GS quickly approached my long strike, I had basically achieved most of my goal to own Nov Puts in GS by twice reducing the cost, first with an Oct/Nov calendar, and second by spreading the Nov Puts to a vertical.  With the stock almost down 9% in 2 trading days since the election, I decided to take my profit and move on.  Read here



Friday Nov 9th:

TRADE: AAPL ($541 ) Bought AAPL DEC 570/600 1×2 Call Spread for .70

Dan:  While I have not been a fan of the euphoria around AAPL’s share performance on the way up, I do find the 25% peak to trough sell off btwn Sept 21st and Friday morning is a tad enticing for a play.  WIth implied volatility through the roof, and the potential for the stock to make new lows on a broad market sell off I wanted to look for a strategy that took advantage of the elevated implied vol, but with minimal premium outlay if the stock doesn’t bounce, 1×2 call spreads achieve both goals.  This is not a long term bullish play by any means and for the most part I remain fairly downbeat about the stock’s potential to see 700 again in the near future, maybe for years, but playing for a move back to 600 in the next few weeks seems like a logical set up.  Read here

TRADE: AXP ($55.90) Bought Jan13 55/50 Put Spread for 1.25

Dan:  The market weakness since Tuesday’s presidential election saw many stocks/sectors suffer for a whole host of issues, while banks stocks were particularly weak, some financials, like AXP showed decent relative strength.  AXP stuck out to me as a stock that could come under pressure in the weeks/months to come and investors contemplate the winners and losers, from a stock perspective, of the compromise of the fiscal cliff.   One thing is for certain, higher earning Americans will pay more taxes, and this could clearly crimp profits for companies who rely on higher end consumers like AXP.   Read here


DAN: I took profits Friday morning on the following short Biased trades as I felt the weakness on Wednesday and Thursday might have gotten a bit overdone on a near term basis:

Action: Sold to Close SPY Nov 142/140 Put Spread ($138) at 1.62 for a 1.62 profit

Read here

Action: Sold to Close JPM ($40.38 ) Nov 41/40 Put Spread at .50 for a .46 profit

Read here

Action: Sold to Close XLY ($45.30 ) Nov 46/ 44 Put Spread at .75 for a .35 profit.

Read here

I will add one more comment, Friday’s inability to hold gains after opening lower (and basically closing unchanged) was fairly unimpressive after the prior 2 days weakness.