Trading Diary: Dec 10th – Dec 14th

by Enis December 16, 2012 8:44 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Dec 10th thru Dec 14th:  


Monday Dec 10th:

Name That Trade in FB ($27.78)

Enis:  No new trade in FB, but laid out my thoughts about why I think FB is likely stuck in a $25-$30 range over the next month.  However, implied volatility too low to initiate a new trade on it.  Read here

Tuesday Dec 11th:

TRADE:  JOY ($57.90) Bought the Dec / Jan13 62.5 call spread for $0.88

Dan:  The setup from purely a sentiment standpoint looked a tad too bearish after completing our preview.  While directional plays with outright long premium did not look particularly attractive in their earnings event, Calendars, regardless of directional view looked attractive.  When the company reported and guided for fy13, the stock had little place to go other than higher without worse than expected results.   Read here

Action: Sold to Close the COST ($98.24) Dec 98 Puts (originally the Dec 105 Puts) at $1.52 for a $0.28 loss

Dan:  Heading into COST’s fiscal Q1 report, I decided to close a bearish trade for a small loss as I thought it was unlikely that the company would disappoint in a dramatic fashion after recently issuing a large one time special dividend to be paid Dec 18th.  The trades original intention was capture what I felt was a strong likelihood off selling pressure, after the stock went ex-dividend prior to their earnings event.   Read here

Wednesday Dec 12th:

Action:  Sold to Close the YHOO ($19.36) Jan13 17.5 / Dec 18 Call Diagonal at $0.52 for a $0.35 gain

Dan:  After being a tad early on spreading the Jan 17.50 calls, there remained little economic benefit of holding this in the money diagonal calendar call spread.  I will look for a pull back to reinitiate this bullish view.  Read here

Thursday Dec 13th:

Action: NKE ($97.20) Bought to Close the Dec14th 95 put for $0.10; Sold to Open the Dec22nd 92.5 put at $0.76
New Position: Long NKE ($97.20) Dec22nd 95 / 92.50 Put Spread for $0.42

Dan:  With NKE down 2% I used the weakness to cover the weekly 95 put and turn the position into a vertical put spread in front of this week’s earnings report.  I now have a $2.50 put spread for less than 20% of the width of the spread.  Read here

TRADE: ADBE ($35.55) Bought the Apr 34 / Jan13 33 Put Diagonal for $1.15

Enis:  Our bearish outlook on ADBE was based on poor growth prospects in its underlying business combined with its extended valuation as a result of this year’s stock rally.  I chose the put diagonal because of its favorable risk/reward characteristics in a variety of scenarios.  The stock’s positive reaction to earnings was a result of improved expectations for the business transition that will translate into better earnings in 2014 and 2015.  Still seems too hopeful to me, and I’ll likely hold the put diagonal until the stock pulls back to the 34 area.

Read here

Friday Dec 14th:

Action: Sold to Close the AAPL ($515.50) Jan13 540 / 580 1×2 Call Spread at $3.50 for a $0.30 gain

Enis:  This trade was a disappointment despite the final outcome being a small gain.  After timing the entry one day prior to AAPL’s short-term bottom on Nov 16th, the trade did not mark-to-market well for most of the past month because AAPL implied volatility shot higher even as the stock higher, a quite rare combo.  As a result, the trade was never worth more than $5.50, and I sold it at $3.50 on Friday morning as AAPL seemed increasingly at risk of breaking its prior lows near $500.  I’d rather have my hands free to initiate a new trade in AAPL if it has another capitulation event below $500 in the next couple weeks.

Read here

TRADE: QCOM ($60.60) Bought the Dec / Jan13 62.5 Call Calendar for $0.88

Dan:  With QCOM down in sympathy with AAPL I looked for ways to play for a near term bounce, selling the next week (dec) 62.50 call and buy longer dated look attractive with short term implied vol bid up so much in the early afternoon.  Read here

TRADE: QCOM ($59.85) Bought the Jan13 62.5 / 65 Call Spread for $0.55

Dan:  By late afternoon the stock had cut half of the morning’s losses and then fallen back towards the lows, but short dated implied vol had settled in a bit, making vertical spreads in Jan13 more attractive at nearly 20% the width of a $2.50 wide Call Spread with break-even levels near where the stock had been trading on Friday’s opening.  Read here



Trade: SPY ($142) Bought the Dec 14th 141/136 Put Spread for .95

Dan: This trade was a great example of how deceptive many of the attractive properties of options trading can be.  For the 2 week period that I owned this Put Spread, the SPY traded in less than a 2% band and then closing at almost exactly the point that I initiated the bearish trade to being with in late Nov.  With little movement, the put that I owned had little reason to retain it’s premium.  With a week or so left to expiration I took a look at my options: to close for a 50% loss, roll out to give myself some more time to have the bearish thesis play out, or roll up my short strike to lower my break-even   Obviously I chose none of the above as I was fairly confident the market would have at least one big down down and give me the opportunity to re-coup most of my losses.  This didn’t happen and the worst possibly scenario happend, the postion expired worthless.  Currently I have a bearish put spread in Dec Quarterly QQQ Puts that was initiated at a slightly better entry point, but letting directional “market call” bets lose all their value is clearly not what we are in the business of doing too often, I will keep this one on a much shorter leash.  Read here