Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Aug 12th through Aug 16th:
Tuesday Aug 13h:
Name That Trade : ORCL ($33.20) Sell the Sept 34 Call, Buy the Sept 33/32 Put Spread for 0.27 credit
CC: We have been keeping an eye on ORCL since its earnings gap back in late June and have been looking at different set ups as the stock has all but filled in the gap on the miss. We detailed away to protect against a potential pull back for current longs as it appears that Tech earnings continue to falter.
Wednesday Aug 14th:
TRADE: WFM ($54.63) Bought the Nov 55 / 47.5 Put Spread for $2.35
Dan: The rash of retail earnings disappointments lead us to believe that the U.S. consumer is not nearly on the positive footing that the XRT and the XLY, near all time highs would have you believe. It is our sense that $4 gasoline at the pump and $107 crude oil is taking its toll on consumers and businesses alike. Consumers could be hit by the double whammy with less cash to spend due to high gas prices, but with businesses feeling the affects of higher input costs, many will be less likely to hire new employees. The other massive pillar of the recovery has been housing, which the recent rise in interest rates could cause homeowners to feel less optimistic about the continued gains of their home values. WFM a domestically focussed high end food retailer will not be immune to consumer caution if the Q2 retail results spill into Q3.
Name That TRADE: Buy GOOG ($872.50) Sept 6th Expiration 880 / 850 / 820 Put Fly for 8.00
Dan: We didn’t pull the trigger on this one as we felt the 6 consecutive down days in the stock did not speak to a great entry point, but we want to do a similar structure in a similar time period if we get a bounce next week. A good thesis is important in trading, but timing most of the time is more important.
Thursday Aug 15th:
TRADE: FXI ($36.25) Bought Sept 36/34/32 Put Fly for .40
Dan: We don’t love the idea of pressing the short on a long term basis, but in the near term, the bounce off last month’s bottom in Chinese equities could be getting a little extended. We wanted to look for a low premium, defined risk way to play for a 5% pull back in the FXI back to support in the next month.
Friday Aug 16th:
ACTION: FB ($37.32) Rolled Aug17th 38 Call to the Aug 23rd 38 Call
New Position: Aug23rd/Oct 38 Call calendar for .90 (currently worth ~1.45)
Dan: It is our sense that $38 IPO price remains important near term resistance, but we want to set up to own upside calls in FB as the Q3 results in Oct should serve as a significant catalyst for the stock. By rolling the Aug calls to next week I am reducing my cost basis and giving me the chance to take advantage of relatively high levels of implied volatility to continue to finance owning the Oct 38 calls.
Action: JCP ($13.55) Sold to Close Aug17th / Aug 23rd 14 Call Spread at .78 for a .33 gain.
Dan: This has been a fairly noisey situation over the last 2 weeks and frankly we decided it best to take the money and run with this winning trade as we head into JCP’s Q2 earnings prior to the open on Tuesday. Your guess is as good as mine whether the stock is up or down 10% plus, but at this point the risk reward of long premium directional trades in the name doesn’t look that compelling.
TRADE: T ($34.00) Buy the Oct 34 Call for .80
Dan: While many had deemed it to be a fore gone conclusion that the Fed would Taper bond buying at their Sept 18th FOMC meeting for much of the last month, the recent weak earnings and spate of so so economic data could have put the kibosh on the Sept time frame. Bond proxies such as T have been down a lot in the last month in sympathy with the rise in interest rates, if the Fed were not to taper I would guess that utilities, reits and telcos get a bounce. I will look to spread these calls if the stock bounces.
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: AAPL ($439.50) Sold the Aug16th 430/420 Put Spread at $2.90 for 2.90 gain
TRADE: QQQ ($75.09) Bought the Aug16th 74/71 Put Spread for $0.37 for a .37 loss THis trade was on a 6 to 1 ratio
Trade: WFC ($42) Bought the July19th / Aug16th 41 Put Calendar for $0.49
TRADE: FDX ($99.37) Bought the August 100/95/90 Put Fly For 1.00
Trade: TXN ($37.44) Long August 38/36 put spread for .63