Trading Diary: February 18th – 21st

by Enis February 23, 2014 7:43 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed, managed or expired in the week that was Feb 18th – Feb 21st:    

Tuesday Feb 18th

Action – Bought to Close the balance of the Feb 14 puts for 0.20 (average gain on the structure was .85, paid even initially)

Enis:  In hindsight, we obviously would have preferred taking off the whole VIX position in early February, as opposed to taking off just half.  With VIX expiry on the morning of Feb. 19th, we decided to cover the Feb 14 put for 0.20 rather than risk a print further below the 14 level.

Read here

Wednesday Feb 19th:

Trade: NLY ($10.97) Bought July 11 Call for $0.43

Enis:  NLY has been on my radar since the start of the year since the stock was so battered in the second half of 2013.  A deep dive on valuation this week convinced me to pull the trigger on a longer-term trade for 3 main reasons.  First, valuation on a price/book basis is near 10 year lows, well below 1, as investors fled the stock when rates move higher last year.  Second, rates have started the year moving lower, and the technical situation indicates that a move lower in rates is more likely than a further move higher in the next few months.  Third, cheap options premium in NLY offered a low risk way to play for a move higher, rather than own the stock and risk a spike higher in rates.

Read here

Trade: BRK.B ($114.37) Bought March / June 110 put calendar for $1.60

Enis:  BRK/B has behaved in line with its technicals over the past few months.  The stock went on a quick move lower after it broke its 200 day moving average.  Its recent rally took it back up to the confluence of its 50 day ma, 200 day ma, and the $115 resistance level that was prior support.  As a result, we pulled the trigger on another bearish trade, though mainly looking for a retest of the early February low, at which point we’ll probably take off the trade.

Read here

Thursday Feb 20th:

Hypothetical Range Bound Trade: Buy the PCLN ($1275) Feb22nd 1210/1275/1340 Call Butterfly for $14.50

Enis:  This rangebound trade would have been a decent winner, but we held off on pulling the trigger since PCLN had shown significant volatility in the month leading up to this earnings event.  As expected though, the company reported a strong earnings result, and the move higher was somewhat tepid, given that the stock’s recent rally over the past couple weeks priced in much of the good news.

Read here

Friday Feb 21st:

TRADE – Buy to open the VIX (14.40) March 14 – 15/19 call spread risk reversal for even money

Enis:  This has been our favorite VIX structure for the past 6 months, since it offers a way to play for an eventual move lower in the S&P 500, without paying for decay, and risking little downside in the meantime.  Especially since 30 day realized volatility in the S&P 500 is near a 6 month high, and the FOMC meeting is a crucial event that will keep March VIX futures elevated, we liked the risk/reward of the entry on Friday as the VIX neared its 1 month low.

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.

11:24 AM EDT – FEBRUARY 10, 2013 BY DAN and CC

New Position: GOOG ($1176) Bought to open Feb 1150 Put for 6.70

New Average on Position $6. 85