Updates – Islands in the Stream (P, ROKU)

by CC February 22, 2018 1:22 pm • Trade Updates

The past 2 days we looked at upcoming events in TV streaming service Roku (ROKU) and Pandora (P) and detailed a couple of trade ideas. Both reported, and both are down so let’s check in. First, ROKU, where we detailed an over-write and a hedge:

Selling a call near the prior all-time of $60 and in-line with implied move could make sense, For instance vs 100 shares of long stock at $51 you could sell the Feb 23rd 60 call at 1.35. If the stock is $60 or lower on Friday’s close you would take in the $1.35, or more than 2%. If the stock were $60 or higher your stock would be called away at $60, but effectively $61.35. And for overwrites, if the stock is through the short call strike you can always cover the call to keep the long stock position in place.

Additionally, for nervous longs or those looking to protect some profits, using that same call sale to finance some protection makes sense. For instance, the Feb23rd 45/35 put spread is 1.80, and vs a sale of the 60’s at 1.35 the hedge would cost just .45 and protect against any declines below 45 in the stock (less the .45 paid)

With the stock 42.40 the 60 calls are worthless so that helped slightly outright for long holders, collecting 1.35. The 45/35 put spread is worth 3.00, so that added 2.55 in protection against the decline. As far as trade management on both, the 60 calls can expire worthless and for the put spread it protects against any further movement lower today and tomorrow. But if the stock goes higher, above 45 by tomorrow’s close, the hedge becomes worthless. So it should be closed at some point in the next day, especially if the stock starts moving higher,

Now Pandora, we detailed a stock alternative here:


-Sell to open 1 April 4 put at 23 cents

-Buy to open 1 April 6 call for 55 cents

-Sell to open 1 April 9 call at 12 cents

With Pandora now 4.50 this package is worth about 10c. So no big deal yet but the 4 strike is in play and from a trade management perspective one needs to keep their eye on any declines from here. At some point if the stock settles in may make sense to roll down the call spread to a more achievable strike.

The bearish idea was:

If I thought there was a high probability that the stock could come in $1 post results I might consider the Feb 23rd weekly 5.50 / 4.50 put spread for 40 cents (vs stock at 5.41 buying 1 feb23rd 5.50 put for 55 cents and selling 1 Feb23rd 4.50 put at 15 cents).

With the stock 4.50 this trade is worth about .90. It’s close to its intrinsic value and can be closed at any point for a profit.