Trading Diary: March 17th – March 21st

by Enis March 23, 2014 8:53 pm • Commentary

Here is a quick recap of all of the trades that we initiated, closed, managed, expired and considered (Name That Trades) in the week that was Mar 17th – Mar 21st:  

Monday Mar 17th:

TRADE: YHOO ($38.80) Bought April 38/34 Put Spread for 1.10

Dan:  As the chatter of Alibaba’s U.S. IPO heightens, we are of the belief that investors may start to look past YHOO’s stake in the Chinese e-commerce behemoth and start to focus on the company’s plan to turn around their core business.  While we think the stock could trade up into the actual iPO, we think it will likely come late Q2 at the earliest and most likely in Q3, and the stock could have a sort of sell the news on the actual filing.

Read here

TRADE:  MSFT ($38.20) Bought the April / May 40 Call Calendar for .40

Dan:  With the stock approaching multi year highs it was our thought that a breakout could be in the works as investors seem to warm to cheap old tech stocks like HPQ and EMC that both recently broke out to new 52 week highs.  While outright purchases of calls did not look that attractive we thought it made sense to try to help finance the purchase of longer dated calls by selling short dated calls.  We would like the stock to continue to hover around $40 as we get closer to April expiration and we will cover April and sell a higher strike call in May.

Read here

Tuesday Mar 18th:

ACTION: Sold to close the RSX ($23) April 22 calls at 1.65 to close for a .65 profit

Dan:  Heading into the referendum for Crimea independence we were of the mindset that Russian equities got a tad oversold and wanted to make a defined risk bullish bet that no matter what the outcome that Russian stocks would have a relief rally.  Well, that’s exactly what we got and we took to quick profit.

Read here

ACTION:  Sold to close the EWG ($30.65) July 31/27 put spread at 1.26 for a .26 gain

Enis:  We decided to take off the EWG put spread after we took off the RSX call position on the bounce in Russian equities on Tuesday.  Both of these positions were based on the headline risk coming out of Russia.  With what seemed like temporary resolution on Tuesday morning, we took both of them off for a gain.  However, the technical situation and the overall behavior of German equities since the start of the year does suggest that they could be a leader on the downside if global markets turn lower in the coming weeks.

Read here

Wednesday Mar 19th:

Name That Trade(s):

Hypothetical Trade  – ADBE ($68.00) Buy to open the April 70/65/60 put fly

Read here

Action:  Selling T to close at $33.03 for a $0.43 gain, or about 1.4%.

Enis:  We had added T to the investment portfolio about a month ago mainly due to its cheap valuation.  The reversal on Wednesday on high volume had us pull the trigger on the position, but in hindsight, it was a bad exit, since T proceeded to rally 4% on Thursday and Friday combined.  Of course, it’s always easy to critique in hindsight.  In reality, T still looks like a rangebound stock that is cheap on a relative basis, but fairly valued on an absolute basis versus its own valuation history.  Given that we don’t see more than 5-10% potential upside, we didn’t want to tie up capital in the position for too long.

Read here

Thursday Mar 20th:

Name That Trade(s):

$DDD Needs Support

Read here

TRADE:  ADBE (68.50) Buy to open the April 70/65/60 put fly for 1.53

Enis:  This was a trade that we laid out after the stock’s reversal after earnings on Wednesday.  The price action suggested that ADBE might have a tough time making a new high above $70 after ADBE did not react well to earnings for the first time in more than a year.  The stock’s incredible run is quite extended on a weekly basis, so we targeted a pullback over the next month with a put fly, since it’s rare that such a strong long-term uptrend reverses hard immediately.  Nonetheless, we might get out at the $65 midpoint if ADBE retraces to there in the next couple weeks.

Read here

TRADE:  CSCO ($21.88) Bought May 22 calls for .63

Dan:  After MSFT’s explosive breakout to new 14 year highs, we wanted to find some other large cap tech stocks that have lagged the broad market, that could catch a bid if the broad market was to have another leg higher.  While sentiment towards CSCO remains subdued, and likely for good reason given their exposure to emerging markets and some weak end markets, calls are cheap and the risk reward for bullish plays looks more favorable than pressing the bearish thesis on the short side.

Read here

Friday Mar 21st:

TRADE: LNKD ($200) Bought May 200/170 Put Spread for $10.50

Dan:  While many of LNKD’s internet peers show little signs of letting up anytime soon, LNKD at key support on a very bearish chart seemed about as good of a press on the short side that we could find.  We chose May expiration as it will catch the company’s next earnings release and if the company were to disappoint on the qtr or guidance for the 3rd consecutive quarter it is our belief that the stock could make a run at the 52 week lows.

Read here

ACTION: Sold to Close AMD shares at $4.06 for a .33 or 9% gain in 2 weeks.

Dan:  I bought AMD shares after identifying the pattern of the stock rallying into its quarterly reports over the last two quarters.  With the stock flatlined just above $3.70 for a couple of weeks it looked ripe to make a move to fill in the prior earnings gap.   Well the stock did what I had hoped and it made sense to take the profit as I have not fundamental reason to be bullish on the stock.

Read here

TRADE: DDD ($56.32) Bought April 60 calls for 1.70

Dan:  We have been very clear that 3D stocks sport ridiculous valuations and investor enthusiasm over the last year for the space reminded us very much of a mania.  With DDD down 40% from the all time highs in January it was our sense that the stock could be setting up for a very sharp relief rally.  While I ultimately think the stock sees lower lows, the sentiment in the last 2 months for the sector might have gotten just a tad overdone and we think the risk reward favors a near term bullish bet over pressing and oversold condition.

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.

 By Enis

TRADE: FXY ($94.72) Bought Mar 97 Call for $1.17

 By Dan and CC

ACTION: GM ($40.80) Buy to Close 1 Dec 40 call for .85

ACTION: GM ($40.80) Sell to Open 1 March 45 Call at .85

 NEW POSITION: GM ($40.80) Long March 40/45 Call Spread for 1.60 (original price of the calendar)
 By Dan, CC, and Enis
ACTION – Sold to open the XHB ($30.80) March 30 put at .70
New position – long the XHB March 32/30 put spread for .35
 By Enis
Action:  CAT ($96.90) Buy the Mar22nd 95/90 1×2 Put Spread for 0.55
New Position – Long the Mar22nd 95/90 1×1 Put Spread for 2.25
 By Dan and Enis
TRADE:  FDX ($132.16) Bought March 130/120/110 Put Fly for 1.95
 By Dan
Action:  Buy to Open the WYNN ($223.90) March 207/185 put spread for 2.93

( I doubled the size of my initial position giving me the average seen above)

 By Enis
TRADE:  CMG ($554) Bought Mar22nd 550/500 Put Spread for $12.25