Trading Diary: Dec 23rd – Dec 27th

by Dan December 29, 2013 6:46 pm • Commentary

We want to take the opportunity to thank all of our readers for their support during 2013, a year that saw RiskReversal continue to improve the quality, and quantity of our content while also broadening out our product offering.   We feel great about what we achieved this year, and look forward to build on what we feel is a very strong base as we approach our three year anniversary in the first quarter.

The week ahead will likely be another quiet week with the New Years Day holiday falling on Wednesday as it did last week for Christmas.  Our content will be lighter than usual as CC and I are on vacation looking to spend some time with our families and recharge for the new year.

Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Dec 23rd – Dec 27th:    

Monday Dec 23rd:

ACTION – Sold to close the TGT ($61.57) Jan18th 60/65/70 call fly at $1.77 for a $0.55 loss

Enis:  TGT was a stock where we liked both the technical and fundamental setup for a rangebound trade between 62 and 68.  The stock had briefly broken $62, but quickly recovered in the third week of December.  We decided that we’d take the position off if TGT broke $62 on the downside for a second time.  That occurred on Dec. 23rd, so we took the position off for a loss.

Read here

Tuesday Dec 24th:

Action: XCO ($5.40) Sold long stock position to close for a .50 loss.

Dan:  Almost two months ago I attempted to catch a falling knife by buying small cap nat gas play (below) that was making fresh multi year lows.  At the time I was very clear about it being a contrarian play and suggested that while I was likely to average in a bit (which I did as the stock went lower) I would also use a fairly tight stop down about 10%.  Well I did average in a bit as the stock declined (at one point down about 20% from my initial purchase) and now on what has amounted to about a 10% bounce of the recent lows I am going to close the position as the fundamental set up has changed.  The long time founder and CEO was ousted last month, and the story appears to be a bit messy, so I am going to take my loss and move on.

Read here

TRADE: Bought SIRI stock at $3.58

Dan:  In a year that saw some massive valuations assigned to online streaming music companies (Pandora in the public market and Spotifiy in the private market) it is our sense that Sirius’s 25 million paying satellite radio subs in the new year could be see a bit of a re-rating despite what is already a hefty valuation for a mature company.  Before doing a whole heck of a lot of work on the company we decided to enter a partial position and will look to average into a full position as we gain more conviction.

Read here

Wednesday Dec 25th:

Merry Christmas!

Thursday Dec 26th:

Deep Dive – $NDAQ : Gift Exchange

Enis:  We highlighted Nasdaq Group as an interesting stock for a potential long side position if the IPO market remains robust in 2014, and the stock pulls back at some point in the next couple months.  $35 would be an ideal entry given valuation and technicals.  In the meantime, the stock’s extended technical situation has us watching the stock rather than entering a new trade here.

Read here

Friday Dec 27th:

Considering Our Options: Sold the VIX (13.33) Feb 14 Put to Buy the Feb 16/20 Call Spread for Even Money

CC:  With the VIX at 12.50, the Jan futures around 14.50 and the Feb futures about 15.50 this structure is about 45c in the hole mark to market. It’s not much of a worry at this point due to time to expiration and the fact that a falling VIX into the end of the year is quite normal. In hindsight we could have waited closet to the holidays to initiate the trade for a better entry but the worry at the time was missing the post FOMC vol collapse lows which usually occur just days after the event.

The only thing that would make us close the trade early is if those issues start to be telegraphed early and any uncertainty from Congress or the Fed starts to abate. But that really hasn’t been the case lately, and we should see at least a run back towards 16 again at some point in the next 2 months, and any real uncertainty that causes a pullback in the markets would make the trade a nice winner. So we’re comfortable with the structure for now, although we could have gotten a better entry this cycle.

Read here


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.

2:02 PM EDT – DECEMBER 19, 2013 BY DAN

Action: TSLA ($140 ) Sold to Close Half of Dec 27th 150 Puts at $11.00 for a $5.50 gain, Leave On Second Half

Total position P/L is net flat, with first half sold for a double, second half expiring worthless.