Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Aug 26th through Aug 30th:
Monday Aug 26th:
Trade – MSFT (34.25) Bought Sept 36/34/32 Put Fly for 70c
Enis: MSFT implied vol spiked hard after the Ballmer resignation news the previous trading day, it is our view that IV in the stock is likely to settle down very soon as investors become resigned to the fact that they are likely to get little news in the near term about succession. The company will hold an analyst meeting on Sept 19, but this too is also likely to offer little new information. The in the money Put Fly defines a range for the stock that is unlikely to be breached, while also selling at the money vol, with defined risk.
Tuesday Aug 27th:
Hypothetical: Name that Trade: TLT ($106) Buy the Sept 21st 102/106/110 Call Fly for $1.55.
Enis: Treasuries have been a one way trade since late May as soon as the term “Taper” entered the financial vernacular. Regardless of the timing, those who have enjoyed the FOMC’s ride for years decided that it was time to get off the Free Money train and sold bonds down to new 52 week lows. If the Fed’s plans to Taper are put on hold, or at least not in Sept, the bond market could see a bit of a re-tracement. We have not pulled the trigger on this trade, but would look to define a range into the Sept FOMC meeting if the TLT (bonds) did in fact have another leg lower prior to. This would be a purely contrarian trade.
Wednesday Aug 28th:
TRADE: TSLA ($167) Bought Oct 150/130/110 Put Fly for 3.00
Dan: The news flow in TSLA has been a one way street since the stock’s breakout back in early April. While we continue to love the story, we have avoided trying to pick a trading top for months as the momentum has been too strong. The stock’s pause at the recent highs could be demonstrating a bit of buyers exhaustion and it would not take much to have a quick reversal in the stock, possibly back to technical support on the next not so great piece of news. The Put Fy that I bought, while out of the money, would not take much of a move lower to be an instant double, while offering a very wide range to the downside to make multiples of the premium committed. Make no mistake about it, this is a speculative trade, and I am risking what I am willing to lose.
Name that Trade – CSCO ($23.45)
Buy the Nov 23/25 Call Spread for $0.65
Sell the Oct 25/22 Put Spread at $2.00
Enis: CSCO’s about face on 2 consecutive better than expected quarters sent investors reeling as optimism was very high heading into the print in mid Aug. The stock’s more than 10% decline since earnings, almost filling in the May earnings gap could set up very soon for a good entry from the long side. We are keeping our eyes on this one.
Hedge 1 – Protection back to the June lows:
SPY ($169) Sell Dec31 175 Call vs Buying Dec 31 165/154 Put Spread for even money
Hedge 2 – Crash Protection Below the January Low
SPY ($169) Sell Dec31 175 Call and Buying Dec 31 155 Put for even money
CC/Dan: These trade structures while meant fro educational purposes will be interesting to keep and eye on to get a sense for what sort of protection the put or put spreads offer in the event of a sharp more lower.
Thursday Aug 29th:
Name that Trade – URBN
Trade 1: URBN ($42.63 ) Buy Oct 42/45/48 Call Fly for .85
Trade 2: URBN ($42.63) Buy Sept / Oct 44 Call Calendar for .60
Dan: This is not a stock we talk about often on the site, but some unusual activity in the Sept calls drew my attention to it, and after a little digging I cam up with a couple potential catalysts in the next month that could cause the stock to bounce. I wanted to lay out the thesis before pulling the trigger as I did not want to initiate any new long premium trades prior to the long holiday weekend.
Friday Aug 30th:
Action – Bought to close FB ($41.28 ) Aug30 4oc for 1.30 – Sold to open Sept13 40c at 1.98
New position – Long the Sept13 40 Oct 38c diagonal for 1.52 (currently worth ~2.35)
Dan: We just keep rolling this one, and one of these weeks the stock will see a nice little decline thus making the roll very profitable, rather than just marginally profitable as it has been for the last 2 weeks. We are still of the mindset that Q3 earnings in late Oct will serve as the next monster catalyst for the stock, but the higher the stock goes prior, the greater the expectations will be, which is the exact opposite of the Q2 report back in July.
Considering Our Options – TRADE: Sold the VIX (14.70) Sept 14 Put to Buy the Sept 17/20 Call Spread for Even Money