Trading Diary: Nov 24th – Nov 28th

by Dan November 30, 2014 8:33 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 Nov 24th – Nov 28th:  


Monday Nov 24th:

Name That Trade – $GILD’s Turf War

Dan:  After taking a look at upcoming potential catalysts for GILD, the technical set up and a quick peek at implied vol, I detailed two different trade structures that would define a wide range for a bullish view that would be PnL neutral down to key support at $90 and offer signifigant upside leverage in the event of a move back towards the prior highs with little to no premium outlay.

Read here

Tuesday Nov 25th:

Name That Trade – $MBLY:  Veering Towards the Guardrail?

Dan:  The next real identfiable catalyts for MBLY shares will be the expiration of its 180 day IPO lock up that should see a substantial bump, multiples of the share amount of the IPO become free to trade on January 28th. This is a stock we have our eye on as it has traded in a fairly tight range the last few weeks, which has resulted in a fairly steep decline in both realized and implied vol.  January could be an interesting month for the stock as those with large gains in the shares in 2014 could be waiting for the calendar to turn to realize such gains, but also the lock up and their next earnings announcements.  For those looking to play lower lows, put calendars look attractive.

Read here

Wednesday Nov 26th:

Chart of the Day – $TLT:  Bond Sanctum of Solace

Enis:  TLT broke out above the $120 level last week, and looks poised to test the mid-October highs above $127.  The strength of Treasuries stands in contrast to the recent weakness in high yield bonds, reflecting the increased discretion on the part of bond traders.  TLT implied volatility also moved higher in the past week as Treasuries rallied.

Read here

Thursday Nov 27th:

Thanksgiving Holiday.

Friday Nov 28th:

From the MorningWord – Thankless Skepticism – Ten HotSpots for the Bulls Case for U.S. Equites in 2015:

1.  U.S. equities have been perceived a ‘safe-haven’ risk asset, and thus in my mind is a very crowded trade, despite weakening breadth.

2. Dollar strength against most major currencies is likely to continue given divergent central bank policies in the developed world.  It is also likely to be a large drag on U.S. multi-nationals profits.

3. The U.S. economy (despite a revised Q3 GDP print of 3.9%) is not likely to be able to remain decoupled from what appears to be a weakening globabl economy.  European PMIs are at at least 52 week lows, while Chinese PMIs are at 6 month lows.

4. Lower oil is not a ‘tax break’ for the U.S. economy as a whole given the importance of the energy sector for new investment.  The slight gains for consumers in a potentially deflationary economy that has shown paltry employment gains and no wage growth is a positive, but possibly offset by the hit from the energy sector and its offshoots.

5. Record retail sales in the current holiday season will be nothing to cheer on the profit front as this is likely to be the most promotional period in history yeilding very weak profits, and setting the stage for perpetual discounting and significant inventory reduction in Q1.

6. Ummm U.S. Treasury Bond Yields, and the spread between that of Soverign debt in Europe, may be the real tell as to the attractiveness of risk assets in this environment.

7.  Russian difficulties on all fronts.  Oil’s decline is adding salt to the wounds as the sanctions were already a pain for the Russian economy.  If Putin feels backed into a corner, he might get more aggressive regarding Ukraine and other former USSR countries.  The Russian Ruble is making another new all-time low vs. the Dollar today.

8.  Defensive sectors might continue to outperform in 2015 considering the alternatives.  Healthcare and utilities are the best performing sectors in 2014.  Which sectors are going to take up the baton in 2015? Energy looks unlikely, materials looks unlikely, financials could struggle given rates remaining low, which leaves technology, industrials and consumer discretionary among the cyclical sectors as the possible candidates.

9.  High yield markets are going to feel more pressure in 2015, particularly from the large amount of issuance in the energy sector.  Worth watching if that has any knock-on effects on the financing market as a whole.

10.  Even as the S&P 500 index has nearly doubled in the past 3 years, daily volatility has been low throughout.  Does the recent increase in commodity and currency volatility signal increased equity volatility in the months to come?