Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Dec 17th thru Dec 21st:
Monday Dec 17h:
Action: Sold to Close the QCOM ($61.64) Dec / Jan 62.5 Put Calendar at $1.05 for a $0.17 gain
Dan: QCOM’s weakness in sympathy with AAPL on Dec 14th had caused a fairly significant spike in short term implied volatility which made calendars look attractive. With QCOM opening up nearly 3% one trading day after initiating the call calendar, I decided too close the calendar for a small gain as I had also bought a vertical call spread (below) that I was more inclined to keep on. Read here
Tuesday Dec 18th:
Action: Sold to Close Half of QCOM ($63.05) Jan13 62.5 / 65 Call Spread at 1.15 for a 0.60 gain
Dan: As I stated above, I initiated 2 different trades to express a near term bullish view, with the stock completely filling in the previous gap from Friday (~5%), I decided to close half of the vertical call spread for more than a double, ensuring that I couldn’t lose on the position. Read here
TRADE: FDX ($92.49) Bought the Dec / Jan13 92.5 Put Calendar for $0.93
Enis: This was primarily a bet on the implied move in FDX. This earnings report seemed like it would contain both good and bad news with little resolution in terms of the company’s long-term trends. Add that to the technical setup, with the stock wedged between support and resistance, and I decided to fade the 3% implied move in the stock. I chose the at-the-money put calendar, but in reality, I could have chosen the at-the-money call calendar, or an iron condor as well. I chose the put calendar in the end because it was only a 2-legged trade, easier to execute than an iron condor, and if the stock did make a big move in either direction, I preferred to hold the 92.5 put as a lottery ticket (on a big move higher) rather than the 92.5 call (on a big move lower). Read here
Wednesday Dec 19th:
Action: Sold to Close the FDX ($94.20) Dec / Jan13 92.5 Put Calendar at $1.33, for a $0.40 gain
Enis: The dilemma for me on this calendar was what to do with a decent winner on my hands the day after earnings. I really did not have much of an opinion on the stock after a decent earnings report, and when the stock was sitting around the $94 level (which was the previous multi-month high), I preferred to take my one-day gains than wait on the stock for the rest of the week. Of course, with the benefit of hindsight, FDX finished just above $92.50 by Friday’s close, and my calendar would be worth more than $2 if I held it today. But what was equally possible is that FDX rallied back up or above $95, and I’d have let a winner turn into a loser. So I took my winner when my thesis played out. Read here
Thursday Dec 20th:
Action: Sold to Close JOY ($62.45) the Dec / Jan13 62.5 Call Calendar at 1.85 for a 0.97 gain
Dan: With One day to expiration of my short leg of the call calendar, I decided to close the position for a double, rather than take the risk of a large one day move that could hurt my profit. In hindsight this was a mistake as the stock, despite a large move in the market on Friday (at least on the open) the stock showed fairly impressive relative strength and ended up closing right at my strikes. Read here
Action: Sold to Close RIMM ($13.90) the Dec 12 puts at 0.19 for a 0.40 loss
Dan: With RIMM up 16% in the 2 weeks since I initiated the Dec weekly 11.50 / Dec regular 12 Put Calendar, my trade had lost two thirds of its value. The implied move (~12%) in the options market was below what I would need to break-even, so holding these puts into the print is a very low probability trade. Not only did I have to get the direction right, but I also needed to get an out-sized move. In hindsight this was a bad decision as the stock was down 20%, but the fact of the matter is I would have most definitely sold these shortly after the open Friday with the stock down 15%. This was a clear example where timing was one of the most Read here
Friday Dec 21st:
TRADE: AMZN ($256.70) Bought the Apr 240 / 200 / 160 Put Butterfly for $5.80
Dan: Long time readers of RiskReversal know that we like to put on bearish trade structures in AMZN when we feel that the fundamentals of the company and the technicals set up for the stock have reached an inflection point. As we approach the end of their all important holiday selling season, with the stock within a few % of all time highs, things might be as good as it gets for the stock. Outright put purchases or straight vertical spreads tend to be expensive which led us to a wide Butterfly. While the time horizon may be a tad stretched for a Butterfly, we felt that the strikes were wide enough to give the structure enough play in a grind lower or a quick spike lower above the guts of the fly. This is kind of a set it and forget it trade. Read here
EXPIRED WORTHLESS:
Trade: NKE Long the Dec 95 / 92.50 Put Spread for a cost of 0.42
Dan: Read our Considering Our Options post from Thursday about the NKE trade here
Trade: RL Long the Dec 145 / 135 Put Spread for a cost of 2.60
Enis: This was a trade I initiated back on Oct. 26th, in collaboration with Carter Worth. At the time, RL was trading at $152, and Carter and I were expecting a convincing break of $150 over the next 2 months. In fact, RL initially traded higher with the market, and then on the Nov. swoon, the stock found support at $148. In retrospect, that was the best time to take this trade off, when it would have been a small loss. Once I missed that opportunity, and the stock rallied with the broader market, the premium left in the options was pretty much gone. The stock is basically unchanged in the past 2 months, but that’s the risk of long premium. Read initial idea here
Trade: CSCO Long the Nov / Dec 16 Put Calendar for 0.15
Dan: Read initial idea here
Trade: WYNN Long the Dec 110 / 100 Put Spread for 2.70
Enis: This was another situation where I should have taken a small loss at the Nov lows in the market, as opposed to trying to insist on riding the trade out for a winner. WYNN has actually been a strong performer in the past month, as Chinese growth hopes have moved all of the Chinese related stocks higher. This trade was originally a calendar, and I turned it into a vertical spread later, which was the wrong move given the lower risk of my original trade structure. Read initial idea here
Trade: BIDU Long Dec 135 / 145 / 155 Call Butterfly for 0.71
Enis: This was a lottery ticket type trade that I knew was most likely to expire worthless. But the risk/reward of paying 0.70 on a 10 dollar wide butterfly was very appealing, particularly since BIDU looked like it had potential for a quick catchup trade if the QIHU competitive fears subsided. In reality, the QIHU competitive fears simply worsened, and BIDU has been a huge laggard in the past 6 monhts. Read initial idea here