Trading Diary: Feb 25th – Mar 1st

by Enis March 3, 2013 8:12 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 25th thru Mar 1st:  

Monday Feb 25th:

Action: Sold to Close AAPL ($454.30) Mar 455 / 475 Call Spread at $7.00 for a $1.50 gain

Enis:  I anticipated a much stronger bounce in AAPL stock in anticipation of the shareholders meeting this week.  However, when the market bounced on Monday morning, AAPL couldn’t rally more than the market, in spite of the upcoming event, so I decided to take my small gain on the trade and move on.  AAPL seemed technically due for a bounce, but when the trade doesn’t follow the thesis, something is wrong.  AAPL did indeed make a new low on Friday, and I’d like to see some strength and stabilization before attempting a trade again on the long side.  Read here

Tuesday Feb 26th:

Action: Sold to Close C ($40.30) Mar15th 41/39 Put Spread at $0.88 for a $0.44 gain, leave other half long at cost base of $0.44

Enis:  I took off half of the trade in order to lock in my initial cost for this trade, especially since the trade was close to worthless just a couple weeks ago.  At this point, I continue to hold half the trade, and my thought is that financials have acted weak in both the U.S. and especially Europe in the past week, so any renewed broader market weakness could see financials lead us lower.  Citigroup looks more vulnerable than the other large banks given its poor technical condition (at the lower end of its 2013 trading range).  Read here

Action: Sold to Close COST ($99.63) Mar 100 puts at $1.95 for a $0.75 gain

Dan: COST had been showing very healthy relative strength in what ended up being a fairly short lived market correction.  With the market lower for the second consecutive day, and the broad market sell off appearing fairly orderly, I decided rather than to spread the Mar 100 Puts by selling a lower strike Put in March, I would take my profits and re-evaluate my short thesis in the name.  Read here

Wednesday Feb 27th:

TRADE: Bought the V ($157.95) Apr 160/150/140 Put Butterfly for $2.45

Enis:  With the market trading higher on Wednesday, I was looking for a short-biased trade in a single name that was fundamentally expensive, and that had been a big winner in the prior year, but looked vulnerable based on its 2013 price action.  Visa fit the bill.  160 has been stout resistance in V, and after trading around this name into and out of its earnings event, I wanted to get involved again as the broader market bounced and V neared the 160 level.  I will probably take this trade off if V revisits the low 150’s again anytime soon.  In the meantime, there is minimal decay in this trade for now, which is the main reason I chose the put fly.  Read here

Thursday Feb 28th:

TRADE: Bought the CRM ($169.65) Apr 160/150/140 Put Butterfly for $1.20.

Dan:  As I looked at CRM’s Q4 earnings announcement, for the life of me I just couldn’t see who the incremental buyer would be for a stock that sports the valuation it does in what will very likely be a future that will bring decelerating growth.  Without a hugely strong view on the company’s near term fundamentals, I identified a short biased trade that I liked very much in the event that the company were to disappoint investors.  The Put Butterfly in Apr that I detailed here offers a very favorable range based on some key technical levels, if, and it was a big IF I got the direction right following the Q4 results.  Outright put purchases were way to expensive, and even straight verticals did not offer the minimum risk reward ratio that we look for in a spread.  For a low conviction fundamental trade it makes sense to look for a trade structure where you can feel good about the potential reward for in what this case seemed to be little risk.

Friday Mar 1st:

TRADE: Bought the SPY ($152.15) Apr 153/148/143 Put Butterfly for $0.90

Dan:  Readers of the site know we see lots of headwinds for earnings growth in 2013, and even greater headwinds for the markets to not only make new highs but see considerable upside without a meaningful pullback.  We will continue to probe the short side, with defined risk trades that offer what we feel are a very favorable risk reward profile.  We chose an in the money Apr SPY Butterfly to increase our odds of success as we see limited upside from current levels in the SPX, but wanted to pick a structure that was not purely extrinsic options premium.   Read here