Trading Diary: Feb 11th – Feb 15th

by Enis February 18, 2013 7:31 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Feb 11th thru Feb 15th:  

Monday Feb 11th:

TRADE: YUM ($64.75) Bought the Mar 65/62.5/60 Put Fly for $0.45

Dan: I have a sneaking suspicion that YUM’s management has an ever-growing credibility problem as the company has gone from a series of beat and raises in the last year to a series of misses and guide downs.  The stock’s price action since the recent miss is nothing short of impressive, filling in the entire earnings gap, but with the broad market at lofty levels, I want to press shorts where I feel the story is broken, and investors are likely to flee at the first hint of a “risk off” trading environment.  The Put Fly that I chose to play for a modest pull back over the coming month offers a very favorable risk reward for an in the money spread, with defined risk.  Read here

Tuesday Feb 12th:

TRADE: TSLA ($37.50) Bought the Mar / Jun 40 Call Calendar for $1.60

Enis:  TSLA is a company where the technicals seem to dictate price action much more than the fundamentals, especially in the short-term since Tesla is still not a profitable company.  With that in mind, the technicals in TSLA seem to be shaping up for some rangebound action.  The 40 level has acted as resistance a couple times now since TSLA became a public company, but the stock rallied strongly off the 35 level to start 2013.  I structured a Mar / Jun 40 call calendar that takes advantage of March’s elevated implied volatility ahead of earnings.  The trade structure benefits if TSLA remains in the 35-45 range by the time March expires.  Read here

Wednesday Feb 13th:

Action: Sold to Close V ($154.62) Mar 160/150/140 Put Fly at $3.75 for a $1.60 gain

Enis:  V basically sold off to my target level for the trade, which was the 50 day moving average.  The 50 day ma hadn’t been convincingly breached for 6 months, so the risk/reward of holding on for more downside at that level seemed skewed to more risk than reward.  Read here

Thursday Feb 14th:

TRADE: Bought the BBRY ($15.02) Mar21st / Apr 14 Put Calendar for $0.64

Dan:  Wow this stock has been moving around, seeing intra-day swings of 5-10% a day!  I may be in the minority, but I don’t think we will see a deal for this company in the next couple months, until potential suitors get a sense for the success of the company’s new Z10 phone and BB10 OS, which will not likely be known until the May/June launch of Z10.  The company’s earnings event in late March could set up to be a fairly volatile event as management will have its first real opportunity to speak to UK and Canadian sales for Z1o.  My calendar trade sets up for rangebound action for the next few weeks with the potential to own a put into the event with a strike at the midpoint of the 2 month range. Read here

Friday Feb 15th:

Trade: WHR ($110.75)  Bought the Mar 110 / 100 Put Spread for $2.60

Enis:  My thesis on the stock is essentially unchanged since I traded a put spread after earnings on Feb 1st, but the entry point improved last week as stock has rallied off the 50 day moving average.  I decided to get involved when I sensed weakness in the overall homebuilding and durable goods sector.  I settled again on a put spread because of the reasonable implied volatility pricing on WHR.  Read here

Trade: COST ($101.85)  Bought the Mar 100 Put for $1.20

Dan:  Unexpected (seemingly negative) news out of WMT late Friday afternoon sent the stock and the market with it for a little ride.  WMT has underperformed the broad market, and its sector all year, so at this point when they report next week an earnings miss is all but “baked in the cake”, but COST has held up amazingly well since paying a special dividend at the end of 2012, and with implied vol as low as it is, and their own earnings expected in a few weeks, a defined risk bearish play in COST seems like a fairly obvious derivative play off of WMT.  I will look to spread on any weakness thus creating a put spread, lowering my break-even and thus my profit potential, but also reducing my premium at risk.   Read here


Note:  There is a natural survivorship bias in our expiring trades.  We take all of our winners off prior to expiry since we don’t take delivery of stock, which leaves only losing trades to report on expiry.  You can see all of our trades reported on the Recent Trades page.

Trade: XLY Long the Feb 48 / 46 Put Spread for $0.55

Read initial idea here

Trade: VIX  Long the Feb 17/20/23 Call Fly for $0.27

Read initial idea here

Trade: NFLX  Long the Jan25th / Feb 90 Put Calendar for $0.89

Enis:  Hard to be more wrong than I was on this one.  That’s why shorting a stock outright can be so dangerous though.

Read initial idea here

Trade: SPY   Long the Feb 149 Put for $1.60

Read initial idea here