Trading Diary: June 22nd to June 26th

by Dan June 28, 2015 1:15 pm • Commentary

Here is a quick recap of trades that we initiated, closed, or debated in the week that was June 22nd to June 26th:  


Monday June 22nd:

New Trade – $TJX: Get the Maxx for the Minimum

Trade: TJX ($66.60) Buy Aug 65 Put for 1.50

Rationale:  The technical set up is weak, the stock reacted poorly to perceived good news last month and options are cheap. If I get the chance to sell a lower strike put on a move lower to reduce my break-even prior to Q2 results I will. As usual with long premium directional trades I will use a 50% premium stop.

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New Trade: Messin’ With $TXN

TXN ($55.35) Buy July / Aug – 53 /55 Put Spread for 1.50

With an eye towards another guide down in late July, I wan to look to finance the purchase of downside puts in a way we have not employed in a while, a diagonal calendar, where we buy a longer dated put strike and finance by selling a shorter dated lower strike put. This is different from a straight calendar where we buy the longer dated and sell the shorter dated option of the same strike

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Name That Trade – $PNRA Flatbread

Considering bearish trade.

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Tuesday June 23rd:

New Trade – Just Getting Through the $WDAY

Trade: WDAY ($81.10) Buy July 80/85/90 Call Butterfly for 1.40

WDAY looks like it found a bit of support at $80, and with software stocks like (CRM) and Adobe (ADBE) at or near all time highs, I suspect WDAY could retrace a bit of the earnings gap back towards its 200 day.  I want to define a range where I believe the stock could trade back to, but do so in manner where I define my risk, and mitigate decay, thus an in the money call butterfly.

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Chart of the Day: Is $AAPL Dead Money?

from where I sit, valuation should not be the main reason to own AAPL.  Map out how growth can re-accelerate, and profitability remain stable/increase. Yeah, yeah, they buyback their stock hand over fist, and iOS market share is stable, but as interest rates rise their cost to fund buybacks/dividends will also increase as most of their cash is overseas.  I think it is safe to say that the stock is far from a No-Brainer at current levels, based on what we know about current products and their runway. It may not be a short here but it could be dead money for the time being.

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Wednesday June 24th:

MorningWord 6/24/15: Carbo Loading – $CRR

Unusual options activity for two straight days caused us to take a closer look at stock that we had never heard of before.

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Name That Trade – $WHR: Laundry Day

On purely a technical level, the stock looks and feels heavy though, and for the purposes of this post I am just going to outline how I would play for a break down of technical support at $180

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Anatomy of a Trade – $AAPL July Strangle Sale vs Long Stock

We did a follow up on a look at a yield enhancement strategy that we detailed a few weeks earlier in Apple.

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Thursday June 25th:

Trade Update $SPY: Closing June Quarterly Put Butterfly for a Loss

Action: SPY ($210) Sold to Close June 30th quarterly 210/200/190 Put Fly at $1.25 for a 25 cent loss

We ran through the potential outcomes for this trade with just a few trading days to expiration and opted to close for a loss.

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Name That Trade: Deja $MU

We took a look at the trade set up into earnings and concluded:

the technical set up is horrible, but to be honest, a very hard press on the short side given how poor sentiment is.  On the flip side the set up for those who think investors will look past near term performance and think that a guide down will set the stage for a series of beats, then an entry here could make sense.  I am not in that camp as a sell off like this stock has seen in 2015 is not likely to turn on a dime. I suspect the stocks needs one last round of hate selling, on massive volume and then it could try to recover from the wash out.

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New Trade – $NKE: Doin It

Trade: NKE ($105.35) Buy June 26th weekly 105/101/97 Put Fly for .95

Made a very short term bearish trade into earnings, with the following caveats (yes I was wrong):

Rationale: This trade targets a move back below the 50 day moving average with good risk reward but with options that will expire tomorrow. This last part means this trade is very binary and is a loser in 3 out of 4 scenarios (higher, flat, lower by a lot). But the risk reward reflects that (3 to 1) and we think the probability of a small move down versus those other scenarios are not all equal.

As always directional long premium strategies are challenged into events like earnings, as you need to get a lot of things right to merely break-even. In this example, if I get the direction wrong then the trade will be a total loss as I have just one trading day to be right.  But I like risking less than 1% in this instance as I think there is a lot of good news in the stock.

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Friday June 26th:

Name That Trade – $INTC: Chips and Dips

Given the 18% decline in MU on Friday, and the weak results and poor price action from large cap tech companies Jabil and Oracle in the last week, I suspect that INTC could have an out-sized move if the company issues a miss and guide lower.

We have this trade on already, but I like it more now than I did in late April.  For those who would look to play for a technical breakdown on poor fundamental news in INTC, targeting their Q2 report on July 15th:

Trade: INTC ($31) Buy July 30 Put for 45 cents

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Name That Trade – $MU: Huge Loss of Memory

Hypothetical Trade: MU ($19.50) Buy July / Oct 21 Call calendar for .85

This is the trade we would consider if looking for MU to bounce in the fall.  Did not pull the trigger though.

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