Trading Diary: March 2nd to March 6th

by Dan March 8, 2015 9:29 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 March 2nd to March 6th:

Monday March 2nd:

Name That Trade – $PANW – Cyber Chase

Took a look at the security software vendor prior to its results, concluded the following:

Good luck shorting high growth / high valuation stocks that seem to be well placed in massive secular shifts (see CRM last week), but I certainly wouldn’t recommend committing new capital here.


Its hard for us to even consider bullish trades into the event, but we do think stock replacement / alternatives make a ton of sense here. For those that have been riding this higher it may be time to define your risk instead of hoping you’re not that last one holding the bag.

The stock had a bit of a volatile week, rallying immediately after the results, making new all time highs, but gave back the gains to close down a little less than 1% on the week.

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Name That Trade – $BBY: Peak Squad?

Took a look at the set up into earnings, concluded the following:

In the near term as for the set up into tomorrow’s print, I suspect a lot of bad news is out, and given the stock’s re-tracement of most of the Jan losses it is safe to suggest that investors are expecting a more upbeat outlook than was given in Jan.  So the set up is tough, if the company is able to guide up a little, than the stock should break-out above the recent highs near $40.  If the company reiterates their previous downbeat out look and actually extends it a bit then the stock will likely re-test the recent lows towards $34.

The stock closed the week just below the breakout level of $40.

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Name That Trade: $SCTY ‘s Triangle of Death

The technical set up looks downright awful, and the company unlike the solar panel manufacturers has fewer levels to pull as it relates to financial engineering.  Oh an options prices are cheap.

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Tuesday March 3rd:

Name That Trade – $ANF’s Situation

Here is a situation that the shorts seem to have right. I took a look heading into earnings, and with the stock very oversold prior to the event, with no shortage of bad news of late and with very high short interest I concluded that some of the recent bearish options flow seemed to be mildly aggressive given how far out of the money one bear term put strike that was bought to open was.  Well the company laid and egg and the stock closed the week down 18%.

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Name That Trade – $AMBA Sauce

Took a look heading into results, and concluded:

The stock is not cheap, and its future for the time being is very much attached to one company (GPRO) who is about to face a whole lot of competition from lower priced providers like Xiaomi who may have much better success in their home country of China. That being said, some analysts think that a lower end Xiaiomi wearable camera could benefitAMBA by dramatically increases the size of its addressable market.

The stock, while not priced to perfection the way GPRO and MBLY were recently prior to their six month IPO lockups, faces similar skepticism on valuation, despite having a much smaller market cap and a more palatable price to sales multiple.

The company had a beat and raise, the stock closed up about 12% on the week.

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Wednesday March 4th:

Name That Trade – $CRM: Cloud Seeding

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New Trade – $CTRP: Trip and Fall?

Trade: CTRP ($45.99) Bought March 45 puts for 1.95

This was a fairly speculative trade where we are risking what we are willing to lose. The company has not set their reporting date yet, but we expect it prior to March expiration.  The stock is expensive, and given some of the weak data we have seen in a Macau so far in 2015, I suspect there is something to extrapolate to the broader Chinese travel industry.

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Anatomy of a Trade – $ANF Gets Snookied

CC had a great post walking through one of the trade structures that we detailed prior the earnings event.

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Thursday March 5th:

Name That Trade – $FEZ: Mario K

With the ECB’s QE announcement out of the way, and what I felt was a fairly strong rally into the well telegraghed event, it was my view we would have gotten a sell the news reaction.  While I wanted to wait for our markets reaction to the Feb Jobs data Friday morning before placing a bearish trade in the EuroStoxx 50, I concluded:

In the near term I am inclined to make a contrarian play that a lot of good news is in European stocks, possibly a short dated put spread in the FEZ as I suspect any further goofiness in Ukraine by Russia will result in another round of harsh economic sanctions which could have a negative spillover effect on large Russian trading partners like Germany.  Oh,

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Name That Trade – $YY Tell ‘Em That It’s Human Nature

This one caught my eye as they were set to report, and while I did not have strong opinion on the company’s ability to meet expectations, the technical set up is what looked very interesting:

Well the stock has since declined 45% from the highs in early September, and is now down 15% on the year.  Looking at the chart with a one year time frame, the stock looks very oversold and is potentially setting up to make an epic double bottom:

YY 1yr chart from Bloomberg

On Friday after better than expected results the stock traded as high as $61 before closing just below $58.

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Friday March 6th:

TRADE: XHB ($35.50) Buy the April 35 /32 put spread for .65

The short trade in U.S. Treasuries and high yielding sectors like REITS and Utilities look a tad oversold in the near term, but if you are of the mindset that investors may continue to flee sectors with sensitivity to higher rates, then housing and related stocks could be the next shoe to drop.  Implied vol in XHB options are relatively cheap, and despite some recent positive news in the sector, the chart looks extended and a failed breakout could mean a re-tracement of half of the 35% move off of the October lows.

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Discussion from CNBC’s Options Action:

Considering Apple Protection for Long Holders:

Hypothetical Overlay vs 100 Shares of AAPL stock long $127.50

AAPL Buy May 140 / 115 Collar for Even Money

-Sell to Open 1 May 140 call at 2.40

-Buy to Open 1 May 115 put for 2.40

Break-Even on May Expiration:

Profits: Gains of the stock between 127.50 and 140, up to 12.50, stock called away above 140, up 10%

Losses: of stock between 127.50 and 115, or about 10%, protection below $115

Rationale:  With the stock up 15% on the year, gaining more market cap in 2015 than 460 stock’s individual market caps in the S&P 500, I think one could say there is a good bit of enthusiasm wrapped up in the name with very well known catalysts.  One would collar stock if they do not want to sell, but would be willing to give up some upside for potential disaster protection. Those potential scenarios would look like this:

1. Watch fails to impress and initial sales disappoint.

2. Management does not go far enough in April for increased cash return

3. Fiscal Q2 results is marred by strength of dollar, iPhone sales not as hot as expected and investors start to realize few catalyst between then and Sept iPhone 6s launch

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