Is Fleetmatics ready to break out?

One of the more common trade setups is the Breakout. When price is probing a key Resistance area I view this as a price extreme. There is no perfect system for catching every breakout but there are things to look for/pay attention to that can help increase the probability of success.

Let’s take a look at $FLTX and review the Daily chart:

FLTX

Here is what I see, maybe you see different things:

1) Several Topping Tails as the $43 level

2) MACD rising

3) CMF holding steady, strong

4) RSI hovering under 70

5) Volume above average this week (declining as it pulled back)

6) 50/200 SMAs both rising

 

- DM Noon CST

 

Position review in Workday

I received this question yesterday: “what is a Diagonal Call Calendar?”

This question was in regards to a position that I have in $WDAY so I thought I would give a breakdown of the trade so far:

  • On the post-Earnings pullback I initiated an April 85/80 Risk Reversal
  • This means I went Short the April $80 Puts and Long the April $85 Calls
  • This trade was done for a $.72 debit (and takes margin)

After the stock gave me the initial bounce I was looking for, I then took the next step which creates the Diagonal Call Calendar:

  • StO the March 06 weekly $90 Calls
  • I collected $.95 in premium (a credit)
  • I then set a Sell Short Stop at $85 (potential hedge)

This is how the trade looks now:

  • I am Long the April/March 06w 85/90 Diagonal Call Calendar
  • I am Short the April $80 Puts
  • I am Short stock at $85 (sell short stop triggered, this is an early tag along trade, could turn into a hedge)

 

 

StO = Sell to Open

- DM Noon CST

 

Trading using RSI starring Google

 

part of the Simple Approach series

GOOGL_B

If you were using RSI to Buy in mid-Oct and mid-Dec then you’ve done well. Now that RSI is probing top side at 70 I would imagine that RSI Sellers show up now. Of course, it could just drift sideways to burn off some of the RSI. Or it could just keep going.

I have an existing position that I have on my list to tend to this week (has weekly Options as part of the trade). I am considering taking stock at $525 but will consider other choices by Friday.

 

- DM Noon CST

 

Trading Activity

Cardinal Health $CAH  I have sold the long stock for +$2.61 and used some of the proceeds to BtO the Apr/Mar $90 Call Calendar. Options Net is: -$.85 (Fab 5)

AutoZone $AZO  I have StC the March $650 Calls for $24.40 avg. I set a Buy Stop at $666 (would be a hedge). Options Net is now: $24.32 (Earnings)

MercadoLibre $MELI  I have BtO the Mar 140/125 Strangle for a 2.25 debit (frees up some margin, defines Risk at $5 either way max). Options Net shrinks a bit to: $10.40 (Earnings)

 

- DM 10:00 AM CST

 

Weekly Option expiration – the plan

This week I have 5 positions that have March 06 weekly Options as part of the trade that will need tending to:

American Express $AXP  I own the 78/80/77 RRCS (submarine basket). I will take stock at $78 and sell Call premium further out & use proceeds to BtC the $80 Calls (the short $77 Puts will go poof)

Baidu $BIDU  I am short the 215/195 Strangle (submarine basket). Hopefully both pieces go poof, keep premium collected

Expedia $EXPE  I own a RRCS involving the $77.5 Calls & $76.5 Puts (the July $87.5 Calls are the other piece). I will take stock at $77.50 and the short Puts should go poof

Fossil Group $FOSL  I am Long stock at $85.01 with a 87/85 Collar. Undecided but likely put on a new Collar

Google $GOOGL  I am long the $525 Calls (other part of Diagonal Call Calendar is the September $550 Calls). Earnings trade. Undecided on what I will do

 

- DM 11:30 AM CST

 

Using an Option Collar for protection

I have an existing Long Stock position in Stratasys that I have left in place for Earnings (I rarely close a position right before an Earnings event). By utilizing the power of Options I have a Calendar Option Collar in place to protect the long stock in $SSYS:

  • Long stock at $55 (since 2/13)
  • Short the March $65 Calls
  • Long the March 13 weekly $65 Puts
  • I have an Options Net of $1.71 right now

Let me further explain a Calendar Option Collar: this means that the Option pieces chosen exist in different expiration’s. In this case I am short Calls in the March monthly expiry and long Puts in the March 13 weekly expiry.

Now a look at a few scenarios to see how the Collar can protect:

1) Price moves up and is near $68 at expiration on March 13th. The stock will be called away due to the Short Calls. The Puts go “poof”. The gain would be $11.71 (Call strike – minus entry + Options Net)

2) Price moves down and is near $60 at expiration on March 13th. The Long Puts are ITM so would be assigned (thus closing the Long Stock piece of the trade). The Short March $65 Calls would remain. The booked stock gain would be $10

3) Price is at $65 on March 13th. You will need to determine what adjustment you will want to do then (if any) or close the trade

 

- DM 9:15 AM CST

 

Earnings Trades update

Netflix $NFLX  I remain Long stock at $345. I did adjust a few of the Options pieces this week. Now have a Jan16/Apr 02w 450/470/440/420 Diagonal Collar Split Put Ratio. A mouthful I know. Options Net is: $6.77 and booked stock gains remain at: $11

Google $GOOGL  I am Long the March 06w/Sep 525/550 Diagonal Call Calendar. Options Net is: -$6.63 and booked stock gains remain at: $58.38

Centene $CNC  I am Long stock at $56 (post-Split) with Short March $60 Calls. Options Net is: $2.64 and booked stock gains remain at $6.00

Twitter $TWTR  I am Long stock 41.99 with Short June $45 Calls. Options Net is: $3.15

Buffalo Wild Wings $BWLD  I am Long the March 190/200/210 Call Fly and Short the June $195 Calls. Options Net is: $11.82

Boston Beer $SAM  See Blog post earlier this week for more details. Currently Long the March 260/270/280/290 Split Call Fly. Options Net: $5.172 and booked stock gains remain at $44.70

MercadoLibre $MELI  I am Short the March 135/130 Strangle. See Blog post. I have Buy/Sell Short Stops set at 136/131 respectively (would be a hedge). Options Net is: $12.65

Air Methods $AIRM  I am Long the March 45/50/55 1×2 Split Call Ratio with Long stock at $52 (hedge). Options Net is: -$.10 and booked stock gains: $3.43

 

- DM 11:45 AM CST