Trading Diary: Jan 12th to Jan 16th

by Dan January 19, 2015 8:38 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 Jan 12th to Jan 16th:  


Monday Jan 12th:

Name That Trade: HTZ ($23.33) Sell Jan16 20 Put to Buy Jan16 25/35 call spread for 40 cents

This is not a trade that we executed but it is on our radar as the growing list of impressive top holders may at some point trump the very poor price action and news flow in the stock since the summer.  Selling put strikes at or near the recent lows to finance the purchase of upside call spreads seems like a far more attractive alternative to a long stock position given the uncertainty around the company and trying to pick a bottom.

Read here

Tuesday Jan 13th:

Trade: AAPL ($110.55) Buy to Open Jan23rd weekly 110/105 Put Spread for 1.30

The stock’s strength on an upgrade from Credit Suisse seemed like a gift for those looking for a short entry on the counter-trend rally.  It was our view that the stock remained in a downtrend despite the morning’s bounce that was caused by an analyst who missed a good bit of AAPL’s move in 2014 and was merely reiterating the bull case.  We chose the next weekly expiration as we had no intention of being in the position for AAPL fiscal Q1 report on Jan 27th, was merely looking to catch a quick reversal as the stock had failed at the downtrend.

Read here

(closed on Friday, read here)

Name That Trade – PANW: White Hat In Hand

In a raging bull market, stocks like PANW will likely be the last ones to fall, but not before making a blow off top.  Seems like any news is good news for a stock like this, but with valuation where it is, the stock is priced for perfection and we like the idea of call spreads in place of long stock for those who think the stock has more upside.  We are not involved in the stock, but its on our radar if we thought the market was about to get silly to the upside.

Read more


Wednesday Jan 14th:

Name That Trade – USO Long Alternatives

Our worst trade of the last year was a bullish risk reversal in USO (read here), so we are a tad gun shy on making contrarian views in oil, but we are happy to outline how we would be inclined to play over a few different time horizons.

Read here

As for our USO risk reversal (linked above), I think it is safe to say that our trade update from October (read here) and our closing bullish positions in CVX and XLE should have signaled to set a stop and take losses, but after being assigned on the short put strike on Fridays close it makes sense to use any strength to close and cut losses.  Here was our thought process regarding risk management from Oct:

It seems like we could be near a capitulation and if that’s the case we’ll look to get out of the loss for as little as possible on any near term reversal.

If the capitulation is not near we’ll have no choice but to lick our wounds by either trading out of the position at a loss or minimizing the risk by buying a lower strike put and turning the short put into a short put spread.

Thursday Jan 15th:

TRADE:  BBRY ($10.20) Bought June 11 / 15 Call Spread for .75

The stock had one heck of a wild ride in a matter of hours on a media report that Samsung had approached BBRY for a possible takeover, causing the stock to rise 30% in two hours, then declining 25% following both company’s denial of the prior report.  We tend to be in the “where there is smoke there is fire camp” and think the sum of the parts at $10 (about $5.5 billion market cap) is fair to cheap to potential acquirers given their patents portfolio.  This was a fairly speculative trade, and we wanted to give the view some time to play out while we risked what we were willing to lose.

Read here

Action: Sold to Close 1/2 position -TSLA ($193.30) Feb 210/180/150 put fly at 10.00 for a $5 profit

The stock’s 13% decline since placing the bearish trade made our put fly worth 2x what we paid,. Given the stock’s tendency for volatility we thought it made sense to close half the position, take out initial cost off of the table and be patient with the balance of the position which would benefit from the stock settling in somewhere between $180 and $200.

Read here

Friday Jan 16th:

ACTION – Sold to close the AAPL ($106.30)  Jan23rd weekly 110/105 Put Spread at $2.80 for a 1.50 profit

If we were just a tad quicker we might have top ticked AAPL on Tuesday morning, catching what was a decline of about 7% from the highs on Tuesday to the lows on Friday.  That is a massive short term move for the largest market cap company in the world on seemingly no news.  We decided to take the quick gains for more than a double, but we would be inclined to once again express a short term bearish view on a bounce back to the downtrend.

Read here

TRADE: TLT ($133.70) Bought to Open March 130/120 Put Spread for $2.00

The analysis that went into this bearish trade on bonds is a tad out of our wheelhouse but given what has seemed to be one way price action in U.S. Treasuries as we approach this Thursday’s ECB meeting which should bring QE to the EuroZone and then the upcoming Jan 28th FOMC meeting, we like playing for a moderation in demand for US bonds as global investors look to jump aboard the ECB express.

Read here

From CNBC’s Options Action: