Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was May 28th through May 31th:
Tuesday May 28th:
This Time Tomorrow – GWRE Edition
Dan: This small cap software name was brought to my attention by a post by The Reformed Broker, Josh Brown after their better than expected fiscal Q2 results back in Feb and the ensuing gap higher. I thought it was worth taking a look prior to their Q3 print to see if the momentum would continue.
Wednesday May 29th:
ACTION: Sold to Close TSLA ($102) June / Sept 100 Call Spread at $7.90 for a 2.90 gain
Dan: The biggest risk to remaining long the call calendar was a large move in either direction away from the strikes prior to June expiration. With the stocks intra-day movement (both up and down) seemingly increasing, and the stock straddling my strikes I decided to take the gains and look for a better entry for a similar trade. My thought was that if the stock continues to be as volatile as it has, I would look to once again sell short dated options, once implied vol picks up to finance the purchase of longer dated calls. I am in the camp that this story has legs and would welcome a pull back in the shares.
Name That Trade – $JOY Hedges and Yield Enhancements for Longs
Dan: The stocks technical set up and its exposure to emerging markets in my mind warranted some risk management options treatment heading into the company’s earnings release. That said for longs looking to add yield, 1×2 call spreads look like a nice overlay strategy for those who were comfortable remaining long the stock.
Thursday May 30th:
TRADE: T ($36.00) Bought the July 36 Call for $0.73
Enis: The thesis for the long T trade is based on its hefty dividend and relative value appeal compared to other defensive sectors. My thought is that given the dearth of defensively valued stocks left in the market, if the broader market does show weakness, which I expect, then a name like T will gain more interest from fund managers looking for a safe haven stock. The timing on this trade was unfortunate, as T fell another dollar from my Thursday morning entry before the end of the week. I had watched this name for a while, waiting for a move to the 200 day ma, but it sliced through that much easier than I expected. I still have almost 2 months until expiry, so I don’t plan on changing the position, but I will treat the position as a salvage operation rather than high hopes for profit going forward. A bounce to the 50 day moving average would be the ideal exit point.
Friday May 31st:
Name That Trade – Crude Oil Inflection Point, $USO
Enis: Oil has held up much better than the rest of the commodity complex over the past 2 months. It has traced out a wedge in the WTI contract, and a simple 101 support level in the Brent contract. Both the wedge and the horizontal support broke on Friday, which could lead to much lower prices as sellers become more aggressive. I laid out a couple trades I was considering (but executed neither myself) in anticipation of such a break.
Action: Sold to Close FXC ($96.07) the June 97 Put at $1.30 for a $0.70 Gain
Enis: The dollar stalled a bit this week after a strong run. I still very much like the long dollar theme in the long-term, but I decided to exit this FXC put position on Friday because the option only has 3 weeks left to expiration, and FXC has continued to hold the important $95.30 low from 2012 for the past 10 days. I am still long FXE puts, and will likely continue to look for good entries to derivations of the long dollar theme.
TRADE: FB ($24.50) Bought July / Aug 25 Call Spread for .58
Dan: The sentiment on the stock is likely worse than the fundamentals at the moment, and with the stock’s 20% sell off peak to trough in May, my sense is that if the stock were able to base at key support, the 2nd quarter earnings due out in late July could serve as a decent catalyst to own calls for.