Eat My Shorts – $PG, $COST, $BA

by CC July 17, 2015 1:30 pm • Commentary

I wanted to go over a couple shorts that we have placed in the midst of this rally and see what of anything we should be looking to do to minimize the damage. First, let’s look at Procter (PG). Here was the original trade:

Trade: PG ($81.25) Buy July 31st weekly 81 put for 1.60

Today with the stock at 82.20 this trade has been cut in half and we’ll need to keep a tight leash on it if it doesn’t fail at this important $82 level because with expiration just 2 weeks away it could quickly approach being worthless. This morning’s action shows just how important this level is as the stock threatened to break below, printing as low as 81.58 but quickly found buyers. In order for us to get back in this trade those buyers need to get burned and maybe we see this stock back towards its 50 day moving average near $80. We’ll keep a close eye on this.

The next on to look at is Costco (COST). We were almost immediately wrong on our entry on this trade as what we thought would serve as resistance with the crossing 200 and 50 day moving averages just north of 141 didn’t provide much resistance at all. Here was the original trade:

Trade: COST ($139) Bought to Open Aug 140/130/125 broken wing Put Butterfly for $2.70

– Bought 1 August 140 put for $4

– Sold 2 Aug 130 puts at .90 ($1.80 total)

– Bought 1 Aug 125 put for .50

Now with the stock nearly $6 higher this trade is in trouble and we need some help from the market. It’s worth less than a dollar and doesn’t make a ton of sense to take the loss at this point unless we see the stock move back towards those moving averages where we could get out for less of a loss. Luckily this trade is August expiration so we have some time and a bit of an event when same store sales are released in early August. But we need some help on this one.

The last trade to check in on is in Boeing (BA). At its heart this trade targets the headwinds faced my multi nationals in this macro environment. We used September options to give the story some time to play out. Here was the original trade:

TRADE: BA ($144.50)  Buy to Open Sept 140 / 130 Put Spread for 2.20

The stock is now a little more than 2 dollars higher and this September put spread is worth about 1.45. So not a total disaster yet but we can’t watch this stock drift higher towards 150 or it will become one. We’ll keep a 50% loss of premium as a stop towards the upside. Any move back towards its 50 day moving average just below 144 and we’re back in business and can be a little patient.