Trading Diary: Oct 13th – Oct 17th

by Dan October 19, 2014 6:18 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 Oct 13th – Oct 17th:  


Monday Oct 13th:

ACTION – Sold to close the IBM ($185.55) Oct 192.50/182.50 put spread at 5.90 for a gain of 2.95

Dan: Our bearish view on IBM has been a consistent theme throughout 2014 as the company’s lack of organic growth with the backdrop of weak global growth have made it one of our favorite go to shorts on rallies.  With the stock’s failure to breakout above $195 in August we saw a good opportuntity for a short entry targeting the mid to low $180s.  With our trade worth more than a double with 4 more days till expiration we decided to take the profit rather than risk a bounce and reduce profitability.

Read here

ACTION: Sold to Close the P ($20.42) Dec 25/20 Put Spread at 3.25 for a gain of 2.20

Dan:  Back in August when I identified that Pandora was in the danger zone of the “Triangle of Death” I looked to leg into a bearish trade based on a bearish fundamental thesis for the prospects for the company into year end. I had first bought a put calendar in an effort to finance the purchase of Dec downside puts. Then when the short leg of the calendar expired worthless I looked to further reduce my break-even by turning the Dec puts into a vertical. Since I initiated the trade in August, the stock was down 25% and in an apparent free-fall, but with gains equally three times of what I had risked, and worth more than 50% of the width of the spread, near the short strike of the spread, and two months to expiration I decided to take the gains and looked to revisit the bearish thesis on a bounce back to the mid $20s.

Read here

ACTION: Sold to Close QQQ ($94) Oct 95/85 put spread at 1.60 for a .80 loss

Dan:  This was an unfortunate situation of mistiming a move in the broad market. We were quick to close the position for a loss with days to expiration as the trade was as of just a few days earlier likely to be a total loss. If we had waited another day or two this trade would have ended up being a winner, but as we had already written it off we thought it prudent to recoup as much premium as we could when we could.

Read here

ACTION: Sold to close NKE ($85.65) Oct 90/85/80 Put Butterfly at 2.80 for a 1.05 gain

Dan:  This trade was conceived to take advantage of what we felt would declining implied volatility with the stock consolidating some of its recent gains.  As the stock approached the mid point of the in the money put fly with four days to expiration, and given the volatility in the markets, we decided to take the gains and not risk a sharp bounce back towards the break-even level in the high $80s.

Read here

Tuesday Oct 14th:

Name That Trade – $SMH:  Shake My Head

Dan:  After the prior Friday’s semiconductor stock implosion, we took a look at SMH weekly options as 40% of the etf’s weight (INTC, ASML and TSM) were set to report in the upcoming week.  While option prices were far from cheap, given the market environment and the upcoming events the weekly move appeared to be priced fairly cheaply.

Read here

Wednesday Oct 15th:

Trade: INTC ($31.22) Bought Nov 31/ 27 Put Spread for 1.05

Dan:  While investors originally cheered INTC’s Q3 results, it was our sense that the sales guidance was just meh, and earnings have been massively aided by stepped up buyback activity.  The stock has been viewed as defensive given its near 3% dividend yield and commitment to cash return, but we think the fundamental factors that have caused enthusiasm about PC replacement cycles are nearing an end and Q3 might be as good as it gets for a while.

Read here

ACTION:  FB ($71.55) Sold to close the Oct31st / Jan15 70 Put Calendar at $1.85 for a $0.45 gain

Enis:  FB neared the $70 support level at the lows on Wednesday, so I decided to take my profit on the put calendar near that level.  The put calendar turned out to be the wrong structure given the swift nature of the stock’s decline.  A put spread would have been far more profitable, but of course, hindsight is always 20/20.  In any case, we might look to fade FB back near the highs of the year if it gets there.

Read here

Name That Trade – $EBAY:  Palling Around With Geniuses

Dan:  We just don’t see what activist Car Icahn sees in the prospects for EBAY aside for an outright take out of their PayPal unit.  Given the recent news that the company has decided to spin off EBAY in a tax free manner it is our sense that the company should in the mean time be exploring other alternatives that could gurantee the highest value for shareholders.  With Apple Pay launching this coming week, it would make sense for Google to bolster their electronics payments efforts to better compete with their arch enemy Apple. To be very clear, we beleive that Google will have a short window to create a viable competetor of their Wallet service to Apple Pay, and an acquisition of PayPal would be one of the few ways to do it.

We did not put on a bullish trade as we view the idea to be specualtive, and we did not want any bullish posititong  in the stock prior to their Q3 report.   We will look to a speculative position if the stock were to get as low as the mid $40s in the coming weeks.

Read here

Thursday Oct 16th:

ACTION:  Sold to CLOSE the AAPL ($97.20) Oct 31st (weeklies) 100 Put at $4.40 for a .20 profit

Dan:  A month ago following Apple’s iPhone 6 launch event I made a bearish trade with intent to capture what I felt would be a sort of sell the news following the phone’s release in the coming week.  Addionally I felt that the sentiment towards the stock was just a bit too rosey and that an inline fiscal Q1 and better than expected current quarter (fiscal Q1) was IN the stock.  Well the stock has shown very impressive relative strength in a volatile market as many deam the stock to be defensive with its 2% dividend yield, balance sheet with 30% in cash nd strong iPhone upgrade cycle in place.

In front of the company’s iPad refresh event I decided to close the bearish position as I did not intend to hold the puts into tomorrow’s earnings event.

Read here

Friday Oct 17th:

Action: Sell to Close XLE ($84.20) Nov 87/92/97 call butterfly at .80 for .70 loss

Dan:  This was a clear example of a trade gone wrong on multiple fronts, thesis, entry and magnitude of move.  The bounce from the lows on Thursday felt like a short term gift to get some premium back on the trade that like certain to be a total bust.

Read here

Name That Trade – Bobbing for $AAPL

Dan:  We broke down the implied move over the next which is elevated at about 4.5% do to tomorro night’s earnings.  We also detailed what seems to be a fairly inexpensive hedge for long holders given the volatile backdrop of the broad market.


Read here

Name That Trade – $AMZN Primed?

Enis:  AMZN reports earnings after the close on Oct 23rd.  The stock has declined 10% on each of the past 3 earnings reports, which is major change in character for the stock compared to the 2009-2013 period.  We’re unlikely to take a position in the name ahead of earnings, but we maintain our fundamentally bearish view.  For those who are interested in a possible position ahead of earnings, we laid out a couple bearish ideas that are good risk/reward structures to play for the stock’s decline.

Read here


Expired Worthless:

From Sept 12th: XLU ($42.35) Bought to Open Oct 42/40 Put Spread for .60

From July 28th: Trade: MAS ($20.38) Bought Aug/ Oct 20 Put Spread for .50