Trading Diary: Feb 9th to Feb 13th

by Dan February 16, 2015 6:42 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 Feb 9th to Feb 13th:  

Monday Feb 9th:

TRADE: $XLF ($24.05) Buy to Open March 13th weekly 24/22.50 put spread for 35 cents

At their March meeting, if the Fed hints at higher rates coming mid year then banks will most certainly be the beneficiary. But in between now and March 18th it is our sense that U.S. banks should be out of favor on any negative headlines out of Greece and the volatile situation in Ukraine.

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Tuesday Feb 10th:

TRADE: KO ($42.55) Buy to open March 42/40 Put Spread for 50 cents

After the company’s beat of previously lowered expectations we took the opportunity to put a short trade on as we see a strong potential for a weak Q1 on continued headwinds from a strong dollar, secular trends away from sugar water and their exposure to emerging markets.  The stock is expensive at 21x this years earnings that are not expected to grow, it is my sense that the slightest hint of higher rates at the March FOMC meeting will cause investors to think twice about what they are paying for yield.

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Name That Trade – $BIDU: 750 Million More Customers to Go

Prior to the company’s Q4 report we previewed the report, but also offered our longer term constructive view on the stock and the company’s prospects in China.

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Wednesday Feb 11th:

Chart of the Day – Tempted by AAPL?

From a Technical perspective, the stock does not look overbought in the near term until the the higher end of the uptrend that has been in place since last year, that gets you to about $130.  The stock looks poised to stay well bid in front of expected expanded cash return announcement in April and the release of the Watch also in April.

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Name That Trade(s) – $FEYE of the Beholder

We previewed the much anticipated earnings report and offered a few ways to play depending on your directional inclination.

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Name That Trade – $TSLA: It’s Electric, Boogie Woogie

We previewed the much anticipated earnings report and offered a few ways to play depending on your current positioning and/or directional inclination

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Thursday Feb 12th:

TRADE: MSFT ($43) Bought the March 44/46 call spread for .34

The stock got near term oversold following its disappointing results and guidance, and prior to the broad market regaining its footing. Since its one day 9% decline in the last week of January there have been no shortage of other large cap stock’s that also declined sharply post results, but many like BIDU, CAT, EXPE, JPM & QCOM subsequently filled in a good bit of their own gaps.  If the market is set to breakout, I suspect MSFT follows suit and fills in part of its recent gap in the coming weeks.

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Name That Trade – IWM 

HYPOTHETICAL TRADE: IWM ($120.50) Buy March 115 / 123 Risk Reversal for .30

The Russell 2000 is approaching its 52 week highs for the 4th time in a year, threatening a massive breakout again.  Risk Reversals (selling the 115 strike put which is support, to finance the purchase of upside calls) look more attractive than long stock here.  We would rather play single stock names for this sort of set up but thought worth noting.

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Friday Feb 13th:

Action: Sold to Close XLU ($45.20) March 48/44 Put Spread at 2.40 to close for a 1.40 profit

With the sector down so much in such a short time, I thought it prudent to take the profit off of the table in this put spread, and look for a re-entry on a bounce back towards $47 as the etf is right at the mid point of the put spread. My bearish thesis has not changed, and I feel the slightest hint by the Fed at the March meeting that they will raise rates in June should send expensive bond proxies like utilities reeling

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TRADE: MU ($31.75) Bought the April 31/26 put spread for 1.30

After a monster 2014, up more than 60%, MU has lagged the broad market, and its peer group, down 9% in 2015 as the Semiconductor Index (SOX) is approaching new 52 week highs.  There was also a ton of opening put buying in March that got my antenas up, obviously could be protection:

Thursday: When SMH was $55.64, a trader paid 1.03 for 45,000 March 54 puts to open

Friday: when SMH was $56.28 a trader paid 1.02 for 50,000 March 55 puts to open

But the lack of participation of INTC and MU, two large components of the index/etf, lead me to believe that pressing weakness on the short side is the way to play.

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From CNBC’s Options Action:

Name That Trade – CSCO: Stealth Security

Hypothetical Trade: CSCO ($29.30) Buy October 30 calls for 1.50

Internet security stocks were hot last week on the heels of FireEye’s better than expected results, and the President’s participation in a summit on Internet Security in Silicon Valley, not to mention his signing of an executive order attempting to better protect our nation and and its companies from cyber threats by encouraging (requiring?) data sharing of these threats and hacks.  CSCO appears to a decent way to play this growing secular trend in computing, but I was a bit shy after the stock’s 9% bounce on its results. On a pull back I may consider playing for a monster breakout above $30. Stay Tuned, not pulling the trigger here.

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