Trading Diary: March 11th – March 15th

by Enis March 17, 2013 5:40 pm • Commentary

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

Monday Mar 11th:

No trades or actions for Monday.

Tuesday Mar 12th:

Action:  Sold to Close TSLA ($38.90) Mar/Jun 40 Call Calendar at $2.00 for a $0.40 gain

Enis:  TSLA had a nice rally to start the month of March, but stalled as it approached its all-time high near 40.  I waited a couple days to see if the stock might break out as it got to that all-important level, but its failure to make a push around 39 made me nervous.  Add to that technical setup the fact that the short Mar 40 call position offered little downside protection at this point, since it had mostly decayed, and I didn’t want to hold a long Jun 40 call on its own in TSLA.  The timing was fortunate, as the stock closed at $35.29 by Friday, and the Jun 40 call was worth 1.05.  Read here

TRADE: CMI ($117.90) Bought Apr 120/110/100 Put Butterfly for $2.85

Enis:  Commodity prices continue to send a negative signal about industrial and manufacturing growth globally.  Copper and oil have not been able to rally in the past month.  The global manufacturing data has been relatively weak to start 2013 (with the exception of the U.S.).  Finally, Chinese policymakers are increasingly focused on curbing property prices and construction, the main driver of the materials sector’s growth in the past 5 years.  Cummins is more exposed to these trends than most U.S. multinationals.  The stock has had a strong run to start 2013, but the fundamental backdrop of its business has hardly improved.  I’ll look to take this trade off on any weakness in CMI down to near 110, which is important support.  Read here

Wednesday Mar 13th:

Name That Trade:  EBAY Catching the Falling Knife Edition

Dan:  We wanted to lay out our thoughts on the name as it hit unchanged on the year around 51.  We don’t want to pull the trigger on a bounce trade just yet, as the internet space feels under pressure overall (see AMZN on Thursday and Friday as well), but we wanted to lay out our thoughts in case EBAY sells off to its 200 day moving average (which it hasn’t touched since Jan 2012) around 48, where we might get involved for a long-biased trade.  EBAY’s analyst day on March 28th will be closely watched, particularly after ChannelAdvisor said sales so far in 2013 have been weaker than expected.  Read here

Thursday Mar 14th:

TRADE: IBM ($214.42) Bought the Apr 215 Straddle for $8.90

Enis:  IBM broke out to all-time highs on Thursday, above 212 resistance.  When a stock breaks out to all-time highs, it sometimes gets more volatile on the upside given that there is no existing technical resistance left for the stock.  Against that, a false breakout followed by selling can leave to downside volatility.  IBM implied volatility, however, was normally priced despite the breakout, creating an opportunity to buy a straddle and just wait for the stock’s next move.  The main risk to this trade is that IBM sits around 215 for the next couple weeks.  It’s possible, but I like the odds of this trade since implied volatility was relatively cheap (level of 16) for a stock breaking out to new highs.  Read here

Friday Mar 15th:

Action:  Sold to Close BBRY ($14.83) Mar22nd / Apr19th 14 Put Calendar at $0.94 for a $0.30 gain

Dan: The stock is close to unchanged in the past month, since we initiated this position in February at 0.64.  The best scenario for this trade was if it closed on Mar 22nd at the $14 level, but this week’s volatile price action after the Z10 million unit order means that headline risk for this name is higher than it’s been for the past month.  So we’ll take the 0.30 gain on the calendar and move on.  Read here

TRADE: AAPL ($440.50) Bought April / May 460 Call Calendar for $7.00

Dan:  I haven’t been positive on AAPL for a while, and I’m still not really positive.  The calendar is only a 10 delta trade, so it’s not a big long bet by any means.  But we are getting closer into the time period where I expect AAPL management to act on the capital return pleas from investors.  I think it’s a short-lived bounce, and don’t expect a long-term bottom in AAPL until we see product innovation and stabilization of the poor earnings trend.  But this trade should hold its value ok between now and Apr expiry since May captures the next earnings event, which will be a major catalyst for the stock, both for the results, and more importantly, for the crucial, crucial guidance.

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: FB Long Feb1st / Mar15th 34 Call Calendar for $0.65

Read initial idea here

Trade: GLD Long Mar16th 165 Call for $1.37

Read initial idea here.

Enis:  I want to write a quick comment on the GLD, as I view this as my worst trade of 2013.  Not because it lost money, but because my initial idea was to buy a straddle or a strangle on GLD, as laid out in this post.  Instead, I decided to pick a direction on flimsy information, when the real opportunity was in simply buying volatility without picking a direction.

Trade: YUM   Long Mar 65/62.5/60 Put Fly for $0.45

Read initial idea here

Trade: CAKE  Long Mar 32 / 30 Put Spread for $0.45

Read initial idea here