Trading Diary: Nov 30th to Dec 4th

by Dan December 6, 2015 3:03 pm • Commentary

Here is a quick recap of trades that we initiated, closed, or debated in the week that was Nov 30th to Dec 4th:

Monday Nov 30th:

Trade Idea – GE Whiz

The next identifiable catalysts for GE will be Q4 earnings scheduled for Jan 22nd before the open, which will fall in February expiration. If I were looking to own calls for a breakout following Q1 earnings I would consider buying a call calendar:

GE ($30.05) Buy the Dec 31st/ Feb $31 call calendar for 33 cents

-Sell to open 1 Dec31st 31 quarterly call at .17

-Buy to open 1 Feb 31 regular call for .50

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Tuesday Dec 1st:

Trade Idea – GM: Fade in Detroit

With GM approaching the upper band of the downtrend (highlighted above), it makes for an interesting short entry, playing for a retest of the low $30s in the coming weeks, especially in the face of the FOMC rate decision.

The company is not expected to report Q4 earnings until early February, so the next identifiable catalyst will be the December monthly print in early January.  Aside from the  potential headline reaction to the Fed’s impending rate liftoff, could cold/wet weather in Dec be the catalyst for the second consecutive miss of expectations after a couple months of unseasonably warm weather in October & November?

*Trade Idea GM ($36) Buy Jan 36/33/30 Put Butterfly for 67 cents

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Wednesday Dec 2nd:

Trade Idea(s) – America Runs From DNKN

DNKN’s relative underperformance to coffee selling peer SBUX is pronounced, and after last quarter’s disappointing results and guidance, the the stock is now sitting on fairly important long term support.  We are offered a couple ways to play with defined risk depending upon one’s directional inclination.

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Thursday Dec 3rd:

Trade Idea – An ORCL Prophesy

With less than two weeks to ORCL’s next earnings reports, the stock’s relative underperformance to many of its large cap software peers sticks out like a sore thumb.  My Take:

My sense is that this could be an important report.  If the company were able to beat and raise, and offer a level of confidence in their cloud transition that they did when on last December’s FQ2 call, then I suspect the stock would likely gain 10%, as it did the day following that report.  If the company were to miss the already lowered FQ2 guidance, and then once again guide down the current quarter, then I suspect that the stock outperforms the implied move on the downside, I suspect a re-test of the double bottom low from August and September would be in the cards, down about 10% from here

The Dec at the money calls and puts (38.5 strike) look dollar cheap right now with the stock at $38.40, each option offered at slightly less than a dollar. This depends on your directional view obviously.

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Friday Dec 4th:

Trade Update – Closing EEM Put Spread for a profit

ACTION – Sold to close the EEM (33.75) Dec 35/32 put spread at 1.25 for a .55 profit

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Trade Idea FCX – Copper Shopper

If one was inclined to make a contrarian bet in FCX into the new year, and additionally ride Icahn’s coat tails with the hopes of some positive change on the corporate front, and with the possibility of a slight uptick in copper demand, then you might want to consider a long stock alternative that creates a band where you have significant leverage to sharp upside move, with the worst case scenario in three months being put the stock down more than 20%:

*Trade Idea: FCX ($7.80) Buy Feb 6 / 10 Risk  Reversal for even money

-Sell to open 1 Feb 6 put at .33

-Buy to open 1 Feb 10 call for .33

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Watch here as I described the trade on Friday’s Options Action on CNBC: