Trading Diary: Sept 2nd – Sept 5th

by Enis September 7, 2014 7:56 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 Sept 2nd – Sept 5th:    

Monday Sept 1st:

Labor Day Holiday

Tuesday Sept 2nd:

Action:  SPLS ($12.78)  Sold Jan15 12 Call at $1.20 for a $0.61 gain

Enis:  When we first bought the Jan15 12 call in SPLS in late June, our thinking was that the stock was near multiyear technical support, the fundamental valuation was quite cheap, and options pricing was also lower than we would have expected.  As a result, the plan was to purchase the longer dated Jan15 12 call with the though that a move to close the May earnings gap above $13 would be a good opportunity to sell that call for a double between late June and Jan15 expiration.  While the fundamental valuation still looks attractive, the risk/reward is more neutral from both a technical and a timing perspective since Jan15 expiration is only 4.5 months away.  So we sold the call for a double last week.

Read here

Name That Trade – SNDK:  Flash Forward

Dan: One day’s relative underperformance certainly does not make a trend, but it was notable that two massive leaders in the semi space over the last year were both down in an otherwise strong day for technology shares.  All semis stocks are not created equal though and SNDK’s breakdown from a high following their Q2 results back in July has placed the stock on our “watch list” as a short candidate if it were not able to make back some of the lost ground and fill in a portion of the earnings gap.  We are looking for an entry closer to the $100 gap level from earnings.

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Wednesday Sept 3rd:

Name That Trade – AAPL:  iWatching Apple

Dan:  The stock’s 4% decline on seemingly non news caused a huge spike in options volume and subsequently a quick pop in implied volatility making overwriting (call sales against long stock) attractive heading into next week’s Sept 9th iPhone 6 launch event, or take that view a step further and look to sell upside calls and use the proceeds to buy puts and add a level of protection.

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Name That Trade – SYNA:  Touched By an Apple

Enis:  SYNA is one of those rare technology stocks that has had a strong run, but where the valuation still looks quite reasonable.  Moreover, SYNA is hardly a technological backwater, as its acquisition of Valiant and the growth of the mobile fingerprint technology business has been a major boon to the company’s revenue growth in the past year.  With little sign of that mobile growth slowing down, we wanted to put this stock on our watch list for a potential future entry in the $70-$75 area.

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Thursday Sept 4th:

Name That Trade – CAT Scratch Fever

Dan:  Its no surprise that corporations have been buying back their own stock hand over fist.  Many like CAT have done so opportunistically and in an aggressive manner in what is called and ASR, and accelerated share repurchase agreement where the company enters into an agreement with an investment bank to buyback there shares in the open market over a specific period of time.  After the company disappointed investors with Q2 sales that were worse than expected, CAT entered into a $2.5 billion asr.  This buying interest has helped the stock get back up towards the breakdown level from prior to earnings, but also kept a massive lid on the price of options as these sorts of deals tend to be vol dampening.  We will be looking at long premium directional strategies once the asr looks to be close to be complete.  Stay tuned.

Read here

Friday Sept 5th:

Name That Trade(s) – TSLA:  Eyeing Consolidation Trades

Dan:  Friday’s 3% decline, seemingly on a quote from the company’s founder and CEO Elon Musk that TSLA stock is “kind of high right now” was notable as the stock had just made a new all time high the prior day.  This is not the first time Musk has called the stock “expensive” but given the company’s new obligation to spend billions to build their so called gigafactory, investors may start to take a slightly more discerning stance towards the stock when insiders display caution.  We have no interest in attempting to pick a top in TSLA, as most are, we are huge fans of the product, management and the company’s vision.  While valuation has kept us out of the stock on the long side we are not foolish enough to use it as the primary input on the short side.  The trades that we are eyeing would play for a consolidation back towards the breakout level of $265.  We had no interest in attempting to press the stock on a down 3% day, but wanted to see how the stock traded early in the week.  Stay tuned.

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