Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Oct 14th – Oct 18th:
Monday Oct 14th:
TRADE: C ($49.25) Bought the Oct19th / Nov16th 50 call calendar for $0.63
Enis: We liked the technical setup into earnings for C, as the stock was buttressed by its 200 day moving average, and the broad earnings trends in the financial stocks was already evident after WFC and JPM earnings. As a result, we played for a small move higher through a call calendar, with the thought that any selloff was likely to be contained to a few percent, but that the stock would have trouble rallying much given the overall negative business environment for financials.
Tuesday Oct 15th:
No trades initiated or closed on Tuesday.
Wednesday Oct 16th:
Action: Sold to Close XOM ($87.40) Nov 85/90/95 Call Fly at $2.20 for a .56 gain
Enis and Dan: We were pleased to see XOM bounce from around the $85 level once again, but the rebound stalled right around the declining 50 day moving average. As a result, we decided to take our gain and move on, as the stock’s relative weakness despite a very strong market backdrop is worrying for the stock’s prospects going forward.
TRADE: Bought the CSCO ($22.98) Oct25th / Nov reg 23 call calendar for .50
Dan: CSCO is the sort of big cap tech cyclical stock that should benefit from any meaningful uptick in global growth. Despite the CEO’s recent comments that spoke to caution and some of large enterprise tech company’s disappointing earnings outlooks, the stock just may be cheap enough in this market environment, where bad news may be priced in. The call calendar sets up decently in front of earnings that will fall in Nov expiration and could offer a cheap way to own the at the money call strike into the print.
Thursday Oct 17th:
TRADE: EBAY ($51.53) Bought the Nov 50/52.5/55 Call Fly for $0.71
Enis: EBAY stock has found support around $50 on multiple occasions in the past year. With the stock nearing that area on a bad earnings number, we wanted to play for continue support, but limited upside. The lack of excitement for EBAY among tech investors has depressed EBAY valuation relative to the rest of the sector, but we think the stock is likely to find support among the value investor community as a result. The trade’s real appreciation will be on time decay rather than direction as long as EBAY remains in the 50 to 55 range. If it does break $50 convincingly, we’ll likely exit with a loss.
Friday Oct 18th:
Action: Sold to Close AAPL ($508.80) Oct/Nov15th 500 Call Calendar at 11.80 for a 6.50 gain
Dan: This trade worked nearly as well as we could have expected despite the quick move a day before expiration above our strikes. With a very slim likelihood of a sell off with hours to expiration there was nothing else to do but to take the profit and move on.
Action: Sold to Close C ($51.00) Oct/Nov 50 Call Calendar at 0.63
Enis: In retrospect (which is always easier, of course), I would have chosen a short gamma structure ahead of C earnings that had a bit more long delta. In other words, though C stock behaved mostly in line with our expectations over the course of the week, we ended up with on gain on our options structure since C rallied 2% more than was ideal. We could have taken the trade off earlier in the week for an almost 50% gain, but decided to wait. If we had sold a put spread or traded a wider in-the-money call fly, we would have been better off.
TRADE: AAPL ($508) Bought the Oct25th/Nov1st $515 Call Calendar for 7.45
Dan: I decided to take the winnings of the call calendar that I closed earlier on Friday and sell the slightly out of the money call for next week’s expiration that will capture the Oct 22nd iPad launch event and then buy the same strike in the Nov 1st expiration that will capture AAPL’s Q4 earnings event on Oct 28th. My sense is that next weeks event will likely be a tad disappointing, giving the stock the opportunity to consolidate some of its recent gains which if the stock closed below $515 on Friday then I will own the Nov 1st 515 calls and look to spread them by turning into a vertical call spread.
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.