Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was July 15th through July 19th:
Tuesday July 16th:
TRADE: SODA ($57.65) Bought Aug 55/65/75 Call Butterfly for $2.75
Enis: SODA is a name that I have liked since March, and I was bummed that I missed its breakout move above 55 that made it nearly to 80 back in May and June. However, the stock has fallen hard in the past month, as analyst downgrades due to concern about the upcoming quarter as well as speculation this week that GMCR’s new soda machine could serve as novel competition. SODA operates in a nascent market though, with plenty of room for growth for all involved. Moreover, the stock’s move lower this week provided a solid entry for a long side trade given that prior resistance around $55 is likely to serve as support going forward.
Read here
Name That Trade – TSLA: Recharging Station
Dan: Upon TSLA’s addition to the Nasdaq 100 on Monday’s close, the stock was met with just a little “sell the news” sort of mentality on Tuesday, with the stock down ~14% on big volume. While the stock has been volatile since its Q1 positive earnings pre-announcement in early April, the volatility has been largely to the upside, which is why Wednesday’s price action (and the stock’s subsequent reaction) was worth taking note of. Our sense was that a test of support at ~$100 would have been an ideal spot to take a shot for a bounce, and we debated a couple structures in which to express the view if in fact we saw continued weakness.
Read here
Wednesday July 17th:
Action: TXN ($38) Sell to close Oct 34 Put at .51 for a .66 loss, and going to let the July 34 put expire worthless for a .27 gain, so on the position so far I will have a .39 loss.
2nd Action: TXN ($38) Buy to open Aug 38 Put for 1.15
New Position: TXN Long Aug 38 / July 34 Put Spread
Dan: With many of TXN’s customers and competitors issuing or pre-announcing poor Q2 results, TXN’s new 52 week high achieved last week makes less and less sense in front of their own results due out Monday night. With the stock up ~12.5% since initiating the Put Calendar in June, I wanted to roll the strikes up and to a nearer expiration in an effort to increase my odds of success as I play for a disappointing guidance.
Read here
Thursday July 18th:
Name That Trade – BA: Playin’ With Fire
Dan: With BA making up nearly all of the lost ground as a result of the previous week’s fire on a 787 Dreamliner at London’s Heathrow Airport, we thought it made sense to look for ways to position for the potential of a second grounding this year of the plane. While the stock is cheap given its backlog of more than 80 Dreamliners over the next 10 years, we don’t see how the story has changed much since the stock was in the $70s earlier in the spring. Now more than ever there appears to be greater headline risk with the next incident with the aircraft.
Read here
Friday July 19th:
Action: FB ($25.80) Sold to Close July / Aug 25 Call Spread at .85 for a .27 gain
Dan: While we like the stealth rally FB has had over the last month or so, GOOG’s results in mobile search could cause investors to think twice about FB’s upside in the quarter just completed. Heading into Friday’s expiration we had to make a decision to either spread the Aug 25 calls that we own by covering July and selling another strike in the weeklies by possibly creating a diagonal or selling a higher strike call in Aug creating a vertical. We thought it prudent to take the profits on the position and take a closer look at the quarter and the potential for positive guidance when the company reports this coming week.
Read here
Action – Sold to close CAT (85.60) July/Aug 85 put calendar at 1.90 for a 0.65 profit
Dan: To be fair, we got pretty lucky on the timing of famed hedge fund short-seller Jim Chanos announcing his new “pick to click” as CAT on the short side this past Wednesday at CNBC’s Delivering Alpha Conference. With the stock just above our strikes, and bouncing off of its 50 day moving average we thought it made sense to close the position for a nice profit in a week and look at otherwise to express our near term bearish view into the company’s Q2 report on Wednesday morning.
Read here
EXPIRED WORTHLESS:
There is no if ands or buts about it, we had a bad few weeks trading options with a directional bias from June expiration to this past Friday. What is extremely frustrating is that we felt we had a very nice trading period in the prior month, catching the downdraft in the market, covering some shorts and not having a single position expire worthless on June expiration. As we have mentioned before, 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, but this month in particular we got a bit too macro, as 4 of the 7 positions listed below were in options of index, sector or commodity etfs. You can see all of our trades reported on the Recent Trades page.
TRADE: SPY ($159.85) Bought July 160 Puts for 2.70
Action: SPY ($161.22) Bought July 160 Puts for 2.00, my new avg is 2.35
Action: Sold to Open SPY ($160.75) July 5th weekly 158 Put at .50
New Position: Long SPY July20th 160 / July 5th 158 Put Spread for 1.85
Read initial post here
New Trade: PEP ($79.88) Bought July 80 / 75 Put Spread for 1.20
Read initial post here
TRADE: TLT ($110.75) Bought July 110/115/120 Call Butterfly for 1.30
Read initial post here
Trade: XLF ($19.67) Bought July 19 puts for .28
Action: XLF ($18.95) Sold July 18 put at .19 to open
New Position: XLF ($19.67) LONG July 19 / 18 put spread for .09
Read initial post here
TRADE: MCD ($99.90) Bought the July 100 / 95 Put Spread for $1.43
Read initial post here
TRADE: BBY ($27.20) Sold the July 26 / 28 Call Spread at $0.99
Read initial post here
TRADE: USO ($33.17) Sell the July 33.5 / 34.5 Call Spread to Buy the July 32.5 / 31.5 Put Spread, collect a $0.10 credit
Read initial post here