Trade Update $TXN: Closing Bearish Diagonal for a Gain

by Dan June 29, 2015 1:17 pm • Commentary

A week ago we made a bearish trade in Texas Instruments (TXN) based on what we felt was waning momentum, poor technical set up, weakening fundamentals with the potential for a guide down on their upcoming Q2 earnings report. Here was the trade (New Trade: Messin’ With $TXN):  

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

-Sell to Open 1 July 53 put at .35

-Buy to Open 1 Aug 55 put for 1.85

Since then the stock has declined a little more than 6%, through our short dated short strike.  At this point the put spread has only about 10 deltas, and is not doing us a whole heck of a lot of good from here on out.

With the stock at $52 it is now worth about $2.30, representing an 80c gain. While our thesis has not changed we are not long the optimal trade structure to benefit from a continued decline. We are now going to take the short term profit and look for a different entry on a different bearish trade targeting earnings, ideally on a pop in the stock.

Action: Sell to Close TXN ($52) July / Aug – 53 /55 Put Spread at 2.3o for a 80 gain

-Buy to close 1 July 53 put for 1.65

-Sell to Close 1 Aug 55 put at 3.95