Trading Diary: Dec 24th, 2012 – Jan 4th, 2013

by Dan January 6, 2013 8:17 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 24th thru Jan 4th:  

Thursday, Dec. 27th:

Action: Sold to Close the QQQ ($63.90) Dec31st Expiry 64 / 62 Put Spread at $0.51 for a $0.04 loss

Dan:  This one came down to the wire and frankly it was getting a little too close for comfort given the light holiday trading, so I closed for a small loss with the fear of a snapback rally coming into year end.  While I did not have the conviction to play for a move higher into the the fiscal cliff deadline, I was cognizant of its potential and felt the prudent thing was to close the position that I held for 3 weeks after finally getting bailed out.   Read here

Wednesday, Jan 2nd:

TRADE: XLY ($48.30) Bought the Feb 48 / 46 Put Spread for 0.55

Dan:  Despite all of the newfound enthusiasm in the equity markets so far in 2013, my sense is that the consumer discretionary space could face some massive headwinds in the first half of 2013 as a result of higher payroll and capital gains taxes that will be felt by all Americans who make more than $450k a year.  Without trying to make a stock specific bet, I wanted to gain some broad bearish exposure through Q4 earnings season which should see this theme play-out in the form of weak forward guidance by many of the XLY’s components.  Read here

Friday, Jan 4th:

TRADE: C ($42.34) Bought the Jan 11th / Jan 18th 41 Put Calendar for 0.32

Dan:  Citi is up 24% in a month and 70% off of the summer lows, the company is in the midst of a restructuring helmed by a new CEO.  When the company reports Q4 earnings on Jan 17th this report will markt new CEO’s first earnings call where my sense would be that cautious optimism will be the main theme. Given the stocks recent sector outperformance, a fairly overbought technical condition, and the relative cheapness of at the money options prior to the event, puts look cheap to play for an outright bearish set up or with the thought of protecting a long.  In this instance, I chose to finance the Jan monthly 41 puts by selling the weeklies of the same strike.  Under most scenarios btwn now and this coming Friday, the sale of the weeklies make sense, barring a move dramatically lower over the next 5 trading days.  I want to set up for a consolidation and a “sell the news” scenario post the Q4 call.  Read here