We’ve previewed several earnings announcements that have reported already this week. I wanted to take a look at GOOG first, which is slightly lower following their report. First, we detailed a stock alternative that is essentially worthless but lost much less than the move lower in the stock. From July 24th:
GOOGL (995) Buy the July28th 1000/1050/1100 Call fly for 11
- Buy 1 July28th 1000 call for 15.75
- Sell 2 July28th 1050 calls at 2.50 (5.00 total)
- Buy 1 July28th 1100 call for .25
Nothing needs to be done there, the trade can expire worthless and can be rolled to lower strikes in Aug or Sept (like 975) for those looking to continue to be long the stock but with defined risk. Next to check in on is an overwrite for long stock holders:
vs 100 shares of GOOGL (995) Sell the Aug 1040 calls at $9
This call is now worth about 0.75 and can be closed and rolled. It added more than $8 in yield to the position (or saved more than $8 of the move lower) The Sept 1000s are about 11.50 and make sense as a sale vs stock here as on a bounce back in the stock 1000 is likely to serve as a magnet.
The last trade to look at was another overlay vs stock, a hedge:
vs 100 shares of GOOGL (995) Buy the July28th 955/1035 collar for 1.00
- Sell 1 July28th 1035 call at 5
- Buy 1 July28th 955 put for 6
This one is quite interesting. It is worth a little more than what was paid but more importantly, from a protection standpoint it’s close to mattering, but only until Friday. Since very little is at risk (it cost 1.00) I think it make sense to leave this on until Friday knowing that if the stock gets hit in the next few days you’re protected below 954. If a flush came the hedge could then be rolled out to Aug or Sept.
Next, let’s look at WYNN which is down about $10 on its report last night. First, the hedge, from July 25th:
Hedge for existing longs:
vs 100 shares WYNN (138) Buy the July28th 133/123 put spread for 1.50
- Buy 1 July28th 133 put for 1.80
- Sell 1 July28th 123 put at .30
This hedge is worth about 4.50 with the stock 128.50 saving about $3 (and counting) in losses in the stock. As far as trade management it needs to be closed/rolled by Friday to avoid selling the shares.
The next trade in WYNN was a stock alternative/ Bullish:
Sell the WYNN (138) July28th 138/135 put spread at 1.30
Buy the WYNN (138) August 138/148 call spread for 3.50
On this trade the short put spread lost 1.70 and the Aug call spread is worth about 1.00 and change. Of course that is less than losses in the stock but it’s a loss nonetheless and is still risking a little more than a dollar out to August . Trade management wise the Aug call spread is pretty far out of the money at this point and probably should be closed and perhaps rolled down.