Yesterday we previewed earnings events in Fedex (FDX) and Adobe (ADBE). With both events out and the stocks moving a bit let’s check in on those trade ideas.
FDX (210) Buy the June30th 210/225/240 call fly for 3.40
Buy 1 June30th 210 call for 5.00
Sell 2 June30th 225 calls at .85 (1.70 total)
Buy 1 June 30th 240 call for .10
Fedex opened lower this morning but has caught a bid for most of the day. With the stock now 213.50 this trade is worth about 4.50. There’s a week and a few days left until it expires. So there’s still about a dollar worth of extrinsic value. More important to that this trade is heavily long deltas now and will only become more so over the next week. It can still make a lot more money if the stock continues higher but it will act very similarly to stock from this point out (less the 1 dollar in extrinsic premium). So for trade management purposes, if this was a defined risk stock alternative a roll at some point makes sense, either back to stock or to a similar trade farther out.
Now to the ADBE. Here was the trade:
ADBE ($141.40) Buy the June30th 140/150/160 call fly for 2.90
Buy 1 June30th 140 call for 4.40
Sell 2 June30th 150 calls at .80 (1.60 total)
Buy 1 June30th 160 call for .10
The stock popped after the event but has found a few sellers during the day. With the stock now 143.32 this trade is worth about 3.70. For trade management purposes this is very similar to FDX. It’s a small winner with some extrinsic premium left but it’s mostly deltas at this point that will determine its success or failure into June 30th.
In both of these cases what we looked to do was to define risk at much less than the implied move, in case the stock went lower, while mimicking stock to the upside with a realistic target in case it outperformed higher. As a stock alternative, the best thing is to look farther out or rotate back into stock, perhaps with a zero cost collar for those looking to keep a handle on gains.