Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Sept 3rd – Sept 6th:
I wanted to take the opportunity to give readers a sense of why last week was such a quiet week from a trading perspective for us on the site. Many long time readers know that we don’t trade for the sake of trading, we do so when we think we have a well thought out idea, and believe we have an attractive trade structure in which to express that view with an eye towards capital preservation. We saw very few in what turned out to be a very uneventful holiday shortened week.
As for the markets , the began to get a bit volatile prior to the long Labor Day Holiday weekend, and we did not care to add new positions prior to what we thought could be some sort of military action against Syria. As for last week, despite early strength overseas resulting from push out of Syria strikes, volume was very low in the U.S. as it appeared the focus would be on the Aug Jobs number on Friday and with many market participants out for the Jewish Holidays it felt more like a late summer week than that of the first week back from summer trading.
As we get closer to the Sept 17/18th FOMC meeting, and the conclusion of Q3, I suspect attention will be squarely focussed on the U.S. once again. So our trading has been light as we are waiting for a bit more clues on the macro front, but once we get clarity on the scope of the Fed’s Tapering of QE, we suspect we will get much more active on the trading front, primarily in single stock positions as we will be focussed on catalyst driven fundamental set-ups.
Wednesday Sept 4th:
Hypothetical: Name that Trade:
Z ($101) Buy Nov 100/80/60 Put Fly for ~$5.00
Dan: There is a little bit of web stock mania going on, and the reaction that I got after speaking about names like Z and YELP last week on TV only reinforces my thoughts that this latest parabolic run will not end well for these stocks. After doing a little work on Z for Fast Money, I concluded that the only real way to make a contrarian bet with defined risk in this stock is with wide put butterflies. I did not pull the trigger yet on the stock, want to see how it acts on the next attempt to the previous all time highs made last week.
Chart of the Day: SCTY – Flaring Out?
Dan: If SCTY was not founded by Elon Musk and he didnt own 25% of the shares outstanding, frankly we would not have a care in the world about the stock. But he does and there are a ton of fairly interesting aspects about this solar panel leasing company that fascinate traders, we are keeping a close eye on this one for a bounce candidate. Friday’s price action was interesting , want to see if it sticks.
Thursday Sept 5th:
MorningWord: Options Market Pricing Movement for AAPL iPhone Event
Dan: Even as AAPL appears to have found a sort of price equilibrium at $500, the options market is pricing a fairly healthy move of about 4% for Tuesday’s iPhone event held in California and the rumored media event in Beijing on Wednesday. AAPL has a history of selling off after the product launches, especially when the stock has run into such event. Given Carl Icahn’s involvement, I suspect that every time the stock sells off 5-10% Mr. Icahn will resort to Twitter-Bombs about his lasted chat with Tim Cook.
Friday Sept 6th:
TRADE: GM ($36.44 ) Bought Oct 37 / 33 Put Spread for 1.25
Dan: There appears to be a fairly big disconnect among U.S. consumer’s ability to purchase discretionary items like Blue Jeans, hoodies, hand bags and iPads, possibly in lieu of big ticket items like Cars. The Aug Auto sales data was huge setting records for transaction price and hitting volumes not seen since late 2007. Which begs the question is this as good as it gets in the near term as it appears that rising rates has caused a lull in the housing data at a time where employment data barely improves.
Name that Trade:
AAPL ($497.50) Buy Nov 500/550/600 Call Butterfly for 10.00
Dan: If you have to play AAPL’s iPhone events next week my thought is that you look out to an expiration which will catch what I would deem to be their next real fundamental catalyst, Q4 earnings in late Oct. When the company guides for fiscal Q1 (Dec qtr) or beyond and they are able to map a course towards a re-acceleration in earnings, then the stock will not likely have a 3 handle on it again for a while. This wide call fly offers a wide range in which it can be profitable with break-even just a couple % away. We looked at lots of different ways to express this short term view, and given our disinterest in doing it ourselves at $500, we thought this structure offered the best risk/reward.