Trading Diary: April 13th -17th

by Dan April 19, 2015 7:58 pm • Commentary

Here is a quick recap of trades that we initiated, closed, or debated in the week that was April 13th to 17th:  


Monday April 13th:

Name That Trade – $NFLX: Queued Up

The sudden bounce in NFLX shares days prior to its Q1 earnings was a bit curious.  We concluded the following:

If you wanted to play what may be trend (or may just be random noise), the stock should rally Thursday. Or maybe the rally into earnings was investors realizing this trend and trying to get ahead of it. (Trading is fun!)

If the stock is going up, it is going through $500, and there will be no overhead resistance.

Read Original Post Here

Name That Trade – $JNJ: Stiff Resistance for Johnson

JNJ was one of the first large cap US multi-nationals to report Q1 results. The implied move into the print might have offered a nice way for long holders to add potential yield to the stock’s 2.7% dividend yield by selling strangles.

Read Original Post Here


Tuesday April 14th:

Trade Update – $INTC: Closing April Puts In Front of Earnings

Action: INTC ($31.53) Sell to Close April 17th 30 puts at .13 for a .10 loss

Prior to the company’s Q1 results that had already been pre-announced we decided to take the loss on this position as the highest probability outcome was that the puts would expire worthless on Friday’s close.

Read Original Post Here

Name That Trade – $CSX: Train in Vain

With the stock down on weak results from NSC the prior evening, in front of its own Q1 results we took a look at the set up and thought options prices looked reasonable for those looking to express directional views.

Read Original Post Here

Name That Trade – $SLB: Schlumber Party

We took a look at options prices heading into their Q1 print and concluded:

With 30 day at the money implied vol in SLB at about 24.50, it is my sense that a continued consolidation in crude, or a rally, would cause options prices to decline materially in related stocks, making long premium strategies a difficult way to make money on a directional basis, but also offering yield enhancement opportunities for long holders.

Read Original Post Here


Wednesday April 15th:

Name That Trade – $UNH: Dow Leader’s Check-Up

Heading into the company’s Q1 results, we concluded the following and offered a couple different ways to express directional views:

While the stock is not particularly cheap, we are in a market that has been continuously rewarding leadership on positive news, and, frankly, discounting negative news as conservative. It is my sense that a beat and raise tomorrow, coupled with more color on the recently announced purchase of the prescription management company Catamaran for $13 billion could send the shares back towards last months all time highs near $120. But the stock is priced to perfection, and the size of the deal could suggest that the company is searching for growth after a massive run in the stock at a time where the stock could screen as expensive on a PE to Growth.

Read Original Post Here

Name That Trade – $NFLX: Face/Off

Following our comments earlier in the week, we offered a few different ways to express directional views.

Read Original Post Here


Thursday April 16th:

MorningWord 4/16/15: The Cyber Security of Things $GOGO

We were surprised that reports of in-flight wifi serving as a potential bridge for hackers to take control of commercial aircrafts had no adverse affect on shares of GOGO.

Read Original Post Here

Name That Trade – How Soon is $NOW

This sort of stock is not our cup of tea, but for those looking to play for continued upward momentum we thought it made sense to define risk prior to the company’s Q1 print.  This was our conclusion on a bullish options trade:

This is a very binary trade with only one day until expiration. But this is also the least expensive way to play for a breakout. The chances of this blowing through the short strike are pretty slim, but there is that risk. The most likely risk is it is instantly worthless on a down or sideways-ish move on earnings.

Read Original Post Here

Name That Trade – $GE Wiz

We are looking for an entry closer to $27, the level that the stock broke out following the company’s announcement to divest their real estate businesses.  A total gap fill towards $26 would be an ideal long entry, but we like the idea of longer data risk reversals defining wide range of long exposure, both up and down.

Read Original Post Here


Friday April 17th:

Name That Trade – $XLY: Consumer Reports

Hypothetical Trade: XLY ($75.15) Buy to Open May 75 Puts for 1.25

We do not like the idea of shorting anything on a down 1.5% day, especially after a period of low volatility. We are looking for a bounce on the open tomorrow morning and possibly make a near the money defined risk play on the consumer discretionary etf.

Read Original Post Here

New Trade – $LULU: Downward Dog?

TRADE: LULU ($66.70) Buy to open May 65 put for 1.30

Getting a bit more micro on the consumer discretionary theme, LULU is a stock we just do not get back near the 52 week highs. We concluded:

The company suffered from a series of misfires in 2014, but has seemingly righted the ship. But here is the problem. The stock’s recent gains (up 20% on 2015 already) more than compensates for renewed enthusiasm as the stock is trading at 35x expected fiscal 2016 earnings growth of 15%. Especially when you consider that massive NKE trades 25x expected fiscal 2016 earnings growth of 12%.  NKE reported earlier this week that they are becoming very focused on women and are committing serious resources to increase sales of women’s apparel by $2 billion by 2017.  What’s interesting to me about that $2 billion number, that is equivalent to LULU’s expected sales this year.

LULU doesn’t report earnings again until June, but in the meantime, if NKE is rolling over, then I think it’s a pretty good bet that LULU is not far behind.

Read Original Post Here


Trades Expiring:

Note:  There is a natural survivorship bias in our expiring trades.  We take all of our winners off prior to expiry since we don’t take delivery of stock, which leaves only losing trades to report on expiry.  You can see all of our trades reported on the Recent Trades page.

By Dan and CC

TRADE:  JPM ($60.55) Buy to April 60/55 Put Spread for 1.20

This trade was a decent winner for a bit soon after we initiated, but the reasons for the traded ended up being proven wrong as the company’s Q1 results were better than most expected.

1:37 pm EDT – March 6, 2015 By Dan

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

This was a great example of how long premium options strategies, even ones like these that are not that far out of the money are nothing more than just premium. Main point here is that the stock closed very near the price we put the trade on more than a month earlier, and the trade was a total loser.