Trading Diary – March 16th to March 20th

by CC March 22, 2015 11:46 pm • Education
Here is a quick recap of trades that we initiated, closed, or debated in the week that was, March 16th to March 20th:
 
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Action: Sell to Close Macy’s ($64.04) March 65/67.50 call spread at .20 for a .40 loss.

It made sense to salvage as much premium as possible as it became less probable that the trade would be profitable on Friday’s close as would need a move above $65.60, or up 2.3%. That did end up happening and those would have been profitable, closing at around .80. We stated at the time of closing that we wanted to roll out that bullish view

read original here

 

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We then rolled out the bullish Macy’s view with a call calender. Here was the trade:

Trade: M ($64) Buy to Open April / May 65 Call Calendar for .95

-Sell to open April 65 call at 1.00

-Buy to open May 65 call for 1.95

The stock is already through the strike and is worth about the same as what we paid. We’ll have to keep a close eye on this one this week as a move back towards $65 will be profitable but a move higher from here puts that trade at risk as it is now short deltas.

read original here

 

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ACTION – Sold to close IBB ($355) Bought the April 325/300 put spread at 1.40 for a 2.30 loss
This one was wrong right out of the gate. We owned an out of the money put spread in IBB, the biotech etf. The thought was that if the small selloff we saw in the broader market worked its way around to to sectors showing the most strength the correction in those could be swift and steep. The problem with shorting strength on that kind of thesis is all you need is the broader market to stabilize for the sector you’re targeting to go parabolic to new highs. That’s just the way it works. And that’s just what happened. The Fed spike the market even more and we’re glad we were able to rescue anything in the trade at that point.
Read original here
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Late in the week we fielded a question on what is the better hedge right now for your portfolio.We went over some hypothetical trades and determined that vol is low enough in the SPY that portfolio hedges already make sense using SPY options. The VIX just isn’t there yet as far as being a no brainer. We’d love to get back in the VIX trade outright at some point this Spring or Summer. You can read the entire discussion here.