Trading Diary – April 27th to May 1st

by Dan May 3, 2015 10:56 am • Commentary

Here is a quick recap of trades that we initiated, closed, or debated in the week that was April 27th to May 1st:  

Monday April 27th:

Name That Trade – $AMAT: Chips and Dip

With the stock down on an 8% gap following the news that AMAT is calling off their bid to merge with Tokyo Electron, we considered ways to play for a bounce into the this month’s earnings event.  Long entry near $19 look attractive.

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Name That Trade(s) – $AAPL Picking

Following our earnings preview of AAPL, we wanted to offer up a few options strategies for those who are previously positioned into the event.

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Tuesday April 28th:

Trade Update – Replacing Long Stock in $TWTR

While losing is losing, in hindsight, this was the right way to use options:

I like the idea of defining my risk into the event. I’ve been riding the stock higher on and off for some time and I still think the stock should work higher as the company is able to increase their user engagement/base and increasingly monetize that base. Prior to Q4 results I bought the stock in the high $30s and rode it up to the high $40s. Now with the stock just above $50 I think the risk/reward feels fairly even. My bullish view on the company has a lot to do with its scarcity value and that a large web/media property will be able to get far more leverage. But that is not what the stock is going to trade on after tonight’s results, which could disappoint high expectations.

Therefore I’m selling my shares here at a profit and replacing them with this bullish but defined risk trade:

TRADE – Bought to open the TWTR ($51.00) May 50/60/70 call fly for 2.50

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Name That Trade – For The $WYNN

We have had the right thesis on this stock for more than a year, but have routinely come up with the wrong options strategies to express a bearish view.  For example, this trade idea, which we did not do, would have been a disaster as the stock decline almost 20% making our low delta bearish idea a loser:

Hypothetical bearish trade – WYNN ($130.30) Buy May 1st weekly/May regular 125 put calendar for 2.00

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Wednesday April 29th:

A Cry for $YELP

Took a look at the set up into earnings and walked away less than sanguine for the stock and we offered an idea for those who thought the stock would re-test the 52 week lows post results, while the risk and the challenges of directional short term long premium trades into earnings event kept us away:

The May 1st weekly 50/42.50 put spread (stock reference $$50.85) is offered at about $2.30, with a break-even at $47.70, down 6%, with a max gain of $5.20 down 16% in line with the avg move over the last 3 qtrs, and also at the Feb low

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Trade Update – $SHAK: Kazaam!

This doesn’t happen to me often, where I buy a stock on a lark and watch it go up more than 50% in 2 months. I took the profit and moved on.

Action: SHAK Sold to Close at $70 for a $27.40 gain

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Thursday April 30th:

Name That Trade: $AAPL Picking

Considering a long entry on a post earnings pullback:

I would be a buyer of dip between $120 and $110, and likely consider Risk Reversals at $120, selling downside put (probably something near the $110 strike) to buy upside call or call spreads (targeting a re-test of Tuesday’s highs).

I don’t think there is any rush at the moment, and a near term oversold condition for the stock would be a great test in my opinion of just how convicted those with massive gains in the stock over the last year really are.

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New Trade – $TSLA: Alternating Currents

TRADE: TSLA ($229) buy to Open May regular 225 / 185 put spread for $8.50

In front of Thursday’s home battery announcement, and this coming week’s earnings event there seems to be just a tad bit of optimism built into the shares after the stock’s 25% rally in the last month.

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Name That Trade – $MCD Playland

In front of two events this week, Turnaround plan from new ceo and April sales, option prices are very expensive and short term yield enhancement opportunities look attractive for long holders.

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Friday May 1st:

Trade Update – $T: Closing Levered Overwrite for a Gain

Action: Sell to Close AT&T at $34.25 for a $1.60 gain, or about 5% in one month, and Close June 34/35 1×2 call spread for a 15 cent debit and a 19 cent loss against the $1.60 gain in the stock

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Trade Update – Macy’s ($M): Closing May Call Fly for a Wash

Action: Sell to Close M ($64.85) May 65/70 1×2 call spread at 1.15 for a wash

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Trade Update – $NKE: Closing May Call Fly for a Wash

Action: Sell to Close NKE ($100.70) May 100/105 1×2 call spread at 1.35 for a 5 cent gain

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