Trading Diary: March 23rd – March 27th

by Dan March 29, 2015 5:39 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 23rd to March 27th:

I also wanted to thank Enis Taner for stepping in with CC early in the week to assist on some really solid idea generation while I was on vacation.

Monday March 23rd:

Name That Trade – $IPGP: Frickin’ Laser Beams

Enis took a look at what I would call an under the radar, nearly $5 billion market cap company which produces laser technology for the telecommunications and medical device fields.  There is shockingly low options open interest for a company of this size, but the recent technical breakout was explosive, and one that we are inclined to keep a close eye on.

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Name That Trade – Totally $RAD All of a Sudden?

Enis took a look at the turnaround in the stock and the business of RAD over the last 6 months and highlighted what has been a steady build up in open interest of the April 9 calls with 150,000.  Despite the run-up in the stock, and the ramp in options prices he remains optimistic on the stock and offered the following conclusion for those who agree with his thesis:

With the very high level of implied volatility, long premium strategies in the stock don’t make a lot of sense, but a longer-term strategy, such as selling the August 7 put to buy the August 9 / 11 call spread for a small credit could be one way to get long exposure for those unwilling to buy the stock here but comfortable owning it below $7 given the fundamental situation.

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Tuesday March 24th:

Name That Trade – $CYBR Chase

Enis offered a fairly detailed bull/bear debate on an extremely high valuation cyber-security stock that has performed very well in 2015, up 30%, but also down 25% from its recent all time highs.  Given the stock’s volatility, relatively high prices for options, Enis believes that defined risk bullish trades offer a good risk/reward compared to long stock. He offered such a strategy for those who think the stock can re-test the prior highs in the coming month.

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Name That Trade – $RH Into Earnings

Enis took a look at the trade set up into RH’s earnings report and offered a few ways to play depending on directional bias or current positioning.

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Wednesday March 25th:

Volatility ETNs: Exposure to What Exactly? – $VIX, $VXX

We get a lot of questions from readers of why we prefer VIX options to trading etns on the index, CC had a very educational piece discussing our views on trading vol on vol.

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Thursday March 26th:

New Trade – $XLP: Did You Try Staples?

TRADE: XLP ($48.46) Bought May 48/46 Put Spread for .50

-Buy to open 1 May 48 put for .82

-Sell to open 1 May 46 put at .32

We have not been a fan of the valuations of consumer staple stocks for months and the reasons why investors have flocked to them.  Now that the fever has broken we are inclined to press weakness as the headwinds that face most components are not likely to abate anytime soon, and we think there has been a clear sentiment shift relating to the sector.

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Name That Trade – The $GME is the Game

We took a look at the set up into the company’s earnings results and offered a few strategies of how to play depending upon your directional inclination or current positioning.

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Friday March 27th:

New Trade – $IWM: Russell, Your Looks Are Becoming a Problem

Trade: IWM ($122.85) Buy to open May 120/115/110 Put Butterfly for .55

-Buy to open 1 May 120 put for 2.05

-Sell to open 2 May 115 puts at 1.00 each or 2.00 total

-Buy to open 1 May 110 put for .50

If the recent breakout in small cap stocks fails to hold in the coming weeks, I suspect we see a quick move back to technical support at $115.  The risk reward on the $10 wide put fly with nearly a 9 to 1 potential payout looked like a sort of “set it and forget it” trade to us.

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Name That Trade – $SPY: Considering Portfolio Protection

Potential Protection: SPY ($205.55) Buy June 200 / 180 Put Spread for $3

-Buy 1 June 200 put for 4.35

-Sell 1 June 182 put at 1.35

The recent pick up in volatility always results in a bunch of questions to us about portfolio protection. While the IWM trade detailed above was a trade, this hypothetical SPY trade is meant to offer a wide range of potential protection for a basket of large cap stocks over the next three months.

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