Trading Diary: November 16th to 20th

by Dan November 22, 2015 6:09 pm • Commentary

Here is a quick recap of trades that we initiated, closed, or debated in the week that was Nov 16th to Nov 20th:

Monday Nov 16th:

Trade Idea – $TJX: Maxx for the Minimum

We took a look at the trade set up into Q3 earnings and offered a defined risk long stock alternative and a hedge.

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Trade Idea – $HD: More Doing

We took a look at the trade set up into Q3 earnings and offered a defined risk way to fade the implied move.

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Tuesday Nov 17th:

Trade Idea – Bag of $DKS

Considering a contrarian long entry.

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Trade Idea – $TGT Practice

We took a look at the trade set up into Q3 earnings and offered trade ideas for those who may be currently positioned or have a directional inclination for a trade.

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Wednesday Nov 18th:

Trade Idea(s) / Q3 Earnings Preview –

We took a look at the trade setup into CRM’s Q3 earnings report and offered a hedge for long holders and a long stock alternative.

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Thursday Nov 19th:

Trade Idea – $NTAP Dat

Trade: NTAP ($30.75) Buy Dec / Mar 33 Call Spread for .90

Rationale – This trade finances March upside calls by selling December of the same strike. The ideal scenario is that the stock grinds higher towards 33 over the next month into Dec expiration. The 90c premium paid for the calendar is the max risk on a sharp moves lower or a a gap move substantially above 33. If we get to Dec expiration and the short Dec call has offset the decay in the long March call we will then look to either turn into a diagonal calendar by selling a higher strike call of a shorter dated expiration, or turn into a vertical spread by selling a higher strike call in March expiration.

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Friday Nov 20th:

Trade Idea – $UUP and Away

Trade: UUP ($25.90) Buy the Dec31st 26.5/ March 26 vertical call calendar for .35

Rationale – Consensus is that the dollar continues higher but there are a lot of moving parts here as no one really expects to see an aggressive FOMC beyond 1 or 2 symbolic rate hikes. And UUP already reflects a lot of the news. So as with any breakout play you want to be careful, define your risk and look to finance as best you can. This won’t lose money on any serious move above the 26.50 strike (although the profits are capped if that move happens before year end). Ideally we want UUP to creep up near 26.50 by year end and then we have a few options how to roll and further reduce premium risk in March

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Trade Idea $TSLA: Electric Slide?

TRADE: TSLA ($220) Buy Dec 31st / March 200 Put spread for $9

Despite the stock’s poor performance, it pressing TSLA’s weakness appears to be a more attractive trade than trying to pick a bottom.  I want to finance the purchase of longer dated puts by selling short dated ones.

I discussed the trade on CNBC’s Options Action on Friday afternoon:

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Trade Update – $XLU: Rolling Call Calendar

Update: XLU ($43.40)

-Bought to close 1 Nov 43 call for .45
-Sold to open 1 Dec 44 call at .45

New Position: Long the Dec 44 / Jan 43 vertical call calendar for .50 (currently worth .70 mark to market)

Rationale – This changes nothing as far as total risk (50c) but with the vertical strikes it can’t lose money if the stock continues higher so therefore it is overall more bullish than the previous same strike calendar. So we’re increasing the delta of the trade (from the original same strike calendar) as the stock goes higher without adding to premium at risk.

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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 Our Trades page.

Expired Worthless:

From Oct 9th:

Trade: XOM ($79.50) Buy Nov 77.50 / 70 Put Spread for 1.45

We had a a couple shots to get out of this position with a gain or a small loss.  Since putting the trade on more than a month ago the stock traded up about 10%, and recently gave back all of those gains.  As recently as last Friday we could have gotten out for $1, but we decided to hole as we think we see lower lows.  In hindsight we should have rolled the bearish view when we could have recouped most of our premium with a week to expiration.