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 June 9th – June 13th:
Monday June 9th:
TRADE: MA ($77.05) Bought Jul19th 80/75/70 Put Butterfly for $1.88
Enis: We laid out 3 separate short volatility strategies on single names with favorable rangebound technical setups, detailed in the Trade Structures post below. In the end, we decided on trading the MA because it’s the stock with the least likelihood of a stock-specific news event prior to the late July earnings report. As a result, we like our odds of collecting decay on this in-the-money fly as long as MA remains rangebound in the coming weeks.
Trade Structures in a Quiet Market – $CAT, $GILD, and $MA
Tuesday June 10th:
TRADE: EBAY ($48.45) Bought July 50 calls for 1.07
Dan: With the stock trading just above 52 week lows, and the news flow going from bad to worse, we think the stock sets up nicely for an oversold bounce on the slightest bit of good news heading into EBAY’s mid July Q2 earnings results. The recent news flow of data breaches to a high level management departure could put pressure on the company to increase share buybacks, or cause activist investor Carl Icahn to go back on the offensive possibly putting upward pressure on the stock in the near term off of an oversold condition. We will look to spread these calls on a move to $50 or above prior to results in an effort to lower our break-even on the trade.
Name That Trade – $ATML: A Mega Microcontroller Bet
Wednesday June 11th:
Name That Trade – Back to $BAC
Enis: We had a successful trade in BAC in the spring. Over the past month, BAC retraced much of its decline from $16 support. However, the fundamental backdrop for the banking sector has deteriorated since the first quarter earnings report. We don’t see anything on the horizon to change the weak outlook for the investment banks, and the mortgage business remains in the doldrums. Our main goal is enter a new bearish BAC trade at the right spot, so we’re waiting for a rally back to near $16 to enter a new trade.
Name That Trade – $AMZN: The Third Dimension
Dan: AMZN’s more than 12% bounce off of last month’s lows places the stock right at important technical resistance as enthusiasm builds into the company’s expected smartphone launch on June 18th. We think the stock could set up as a nice short playing for a re-test of the $300 level as we head into Q2 results in late July.
Thursday June 12th:
Action: TWTR ($37) Sold July/Sept 35 Call Spread at 1.85 for a .60 gain
NEW TRADE: TWTR ($37) Bought to Open the Sept 40/50 Call Spread for 2.10 (effective price 1.45 in the roll)
Dan: We had the direction right, but the magnitude and the timing of the move incorrect. We are rolling the profits from the call calendar into an out of the money vertical call spread as a sort of set it and forget it trade in the event of a sharp move higher in TWTR shares by Sept expiration.
TRADE: IBB ($248) Bought Jul19th 245/230/215 Put Butterfly for $2.74
Enis: The biotech sector has staged a nearly 20% rally from its mid-April lows. However, the sector is still well below its early March highs, an indication of the aggressiveness of the selling in March and April. The technical setup suggests that the $250-$255 area is pivotal, so we decided to take a bearish trade near that technical resistance area, with the thought that we will take off the position for a loss if IBB breaks above that area. If IBB declines from here, we’d ideally take off the put fly near $230.
Friday June 13th:
TRADE: INTC ($29.89) Bought July 11th/ July 18th 29 Puts spread for .14
Dan: Expectations have clearly been ratcheted higher by Thursday’s pre-announcement. It is our sense that if the company does not materially raise Q3 and full year 2014 guidance that the stock could see a re-tracement back towards $28 following their July 15th earnings. While we did not want to simply buy out of the money puts in a slow summer trading environment, also a period that will capture what will sure to be sleepy holiday trading into the July 4th weekend, we wanted to finance the purchase of puts by selling a shorter dated on.
Name That Trade $USO: Crude Realities
HYPOTHETICAL TRADE: USO ($39.20) Buy Aug 38/36 put spread for .45
Dan: If the situation in IRAQ causes a further spike in crude we would look to fade this move using the USO as the commodity reaches technical resistance near $110.