A Trade Review in Whole Foods

I have owned a position in the Long-Term account since 12/17/2013 in $WFM and thought I would share some thoughts on where the position stands now – and what I may do going forward.

Here are the details:

  • I am long stock at $56 since 12/17/2013
  • I own an April 25 weekly 50/52 Collar (short $50 Calls, long $52 Puts)
  • I have an Options Net of $4.13
  • I have a stock-based loss of -$2.39 as of the close Friday (several stock trades along the way around the core position)

Since I had taken a longer term view when I started the position, let’s take a look at the Weekly chart:

WFM_WeeklyHere is what I see in the chart:

  1. Price has fallen down thru this Rising Trend-line
  2. The MACD has made a new low
  3. RSI is probing for a new low
  4. Price has given up the October 2012 Breakout level
  5. Price is fast approaching the #1 Volume at Price (VaP) bar
  6. Price gave up the 50 SMA convincingly in March 2014
  7. Volume has been consistently Bearish for 4 weeks

So now what? Let’s break down the Collar to see how it is helping the long stock piece:

  • The Short $50 Calls are OTM (out of the money) so no chance of being exercised unless price recovers that level
  • The Long $52 Puts are almost $4 ITM (in the money) so the long stock piece is protected

Potential course of action this week (since the Collar is to expire next Friday):

1) close the trade Friday & look for a better opportunity elsewhere

2) adjust the Collar to a future expiration (the common step I have been taking as of late)

3) Too late to switch to a Bearish stance now given the $17 down move since the October 2013 peak?


Position Updates – 04/19/2014

This was a usually busy week for Options expiration. There was a little more difficulty to it in that it was a holiday shortened week so I had to spend more time each day tending to my Options Expiration plan.

Newly added this week that survived:

I had a higher number of exits than normal (especially in the Swing account) this week – not sure what that means, if anything:

  • $ALK I had owned a May 95/100/85 Risk Reversal CS that hit a Stop on 04/14
  • $CSH A long stock position (was new for this week)
  • $CRR I had owned an April Risk Reversal CS since 03/26 that had morphed into a Short CS & Puts trade (covered by a long stock hedge)
  • $GDP A long stock position (was new for this week)
  • $TKMR A short stock position (was new for this week)
  • $XONE A position in the Long-Term account that had taken on many faces since initially opened on 09/06/2013
  • $AKS I had owned an April 7/8/6 Risk Reversal CS in the IRA
  • $EFII A long stock position in the IRA that I elected not to hold into Earnings (was a good call). I had owned since 10/28/2013
  • $HIMX One of my “sleepers” for 2014 had a good run but the market has soured on it as of late. I end up with an overall gain of $3.05
  • $MPC (Fab 5)
  • $FAST (Earnings)
  • $GIII (Earnings)
  • $GOOG (Earnings)
  • $KMX (Earnings)
  • $LLTC (Earnings)
  • $MON (Earnings)
  • $NES (Earnings)
  • $PVH (Earnings)
  • $RH (Earnings)
  • $STZ (Earnings)
  • $URI (Earnings)

Submarine Basket:

  • $DDD I am long an April 25 weekly 47/45 Put Spread
  • $FNSR long stock
  • $FSLR long stock with an April 25 weekly 67/67/61 Collar PS
  • $JBHT long stock with a May 75/75/65 Collar PS
  • $KING long a May 18/19 CS
  • $KR long stock
  • $PBR long stock with a May 02 weekly 14/13.5/12.5 Collar PS
  • $PG long stock
  • $V long stock with an April 25 weekly 210 Collar


  • $KBH long stock with short Calls (covered calls)
  • $NKE long stock with a Short April 25 weekly $73 Strangle (covered Calls, naked Puts)
  • $SNDK long stock with an Apr 25w Collar

Here is the Summary:



The Fab 5 update – 04/18/2014

I have a full stable of 5 players & a 6th man. The only material change is the exit on the left-over Option pieces for the $MPC position.

$NEE led the way into the 3-day weekend with the best close at $96.59 with $APH on its heels. I have given the $HON position a time-rule exception but feel it may be time to look at other candidates now that Earnings are past (owned for 9 weeks now).

The Basket is up $11.38 on the stock pieces and there is an Options Net of $15.54 as well.

Here is the Summary:

04192014Fab 5 candidates:


One of the most common trading setups is the Breakout. The idea is that a stock is hitting Resistance but has indication of strength as it approaches. There are a variety of indicators that will be used by traders to trigger a breakout. Here are just a few that traders pay attention to:

  • Volume. Is it rising or not
  • RSI. Is it climbing, flat, or falling
  • MACD. Curling up is really a nice boost
  • Moving Averages. What is the nearest one. Is it rising or falling
  • Pattern leading up to the Resistance line. Is the range tightening

Here is a Daily chart of $DY that looks to be setting up for a Breakout soon:

DYWhat do you think?

Some additional criteria that is important to me – to my Trading Process – is Options. What has me pause at considering a trade here is the lack of Option trading (15 contracts total in the May expiration in Open Interest) as well as lack of strike selection.

Does this hold you back?

The 50/50 Basket update – 04/13/2014

For those not familiar with this Basket of stocks here is a brief review behind the picking of stocks for this basket:

1) I look for stocks that achieve a move that is 50% above the 50 SMA. In my view these are extended and are due for profit taking, getting parabolic, etc. This is NOT a fundamental call, I don’t use any moving averages or other indicators. I enter at any sign of a Topping Tail. Only $BIOF has hit this scan this week (a rarity to be so thin but a nice tell on the market)

2) I typically short the stock (so this takes margin) but sometimes will just buy Puts if good liquidity in the Option chain(s)

3) The basket approach helps to smooth out the daily whipsaw in some of these stocks individually

4) The original plan was to hold up to 10 but March provided a LOT of high flyers. The list reached 20 but I have closed 4 positions recently so I am down to 16

5) I added Bear Collars this week on 2 positions that look like they are seeing some stakes in the ground now from the Bulls

Now on to the Table for the Basket:


A trade review starring Ambarella

When the market is under selling pressure there are several key things that a trader must do to protect capital:

1) Obey your Stops

2) Utilize Options to protect gains and/or take advantage of the elevated volatility

3) Don’t over-trade, it is ok to sit on your hands (especially if you are long-only)

One of the common elements to my own trading – personal & for clients – is in the use of Options. This can be as a trade by itself or in conjunction with stock (long or short). I add Collars a LOT to my trades and a week like this one reminds me just how important they are in protecting a position.

To illustrate this I chose the current $AMBA position to discuss in this post. Here is the trade:

  • I am long stock at $13.45 (since 08/26/2013)
  • I have an April 28/30/24 Collar PS (put spread). This means I am short the April $28 Calls & long the 30/24 Put Spread
  • In addition, I have a Stop set on the stock piece at $25.01

Here is a Daily chart that shows the price range for the Collar PS:

AMBA_CollarThe Green area represent the range from the PS pieces and the Blue line is the short Call strike. A few things to note here:

1) The long $30 Puts are well ITM so they are providing protection to the long stock piece already

2) The short $28 Calls are now OTM so the stock is no longer capped

3) The $24 Puts “cap” the PS so this is why I want to have the Stop set on the stock, in case it tries to run at the 200 SMA (protection won’t help me beyond $24)

The Fab 5 – 04122014

It has been quiet in the Fab 5 recently as the market selling pressure makes it more difficult for momentum trades like the $100 Roll. Despite this I did manage to add a new position this week as a 6th man: $SNP on 04/07.

Notable activity:

  • $AGU I adjusted the April weekly Collar to next week April monthly
  • $HON I adjusted the April weekly short Calls to next week April monthly
  • $SNP A new position at a $90 trigger on 04/07. I added an April $95 Collar on 04/10
  • $WDC I adjusted the short Calls down to $91 on 04/07 to improve the Options Net

Here is the Summary:


Positions Update – 04/12/2014

Given the market jitters I elected to trade less and just manage the existing positions I have. Some of the activity this week:

  • $ALK I had exited the existing Call Spread on 04/07 but wanted to revisit a new trade. I initiated a May Risk Reversal CS on 04/09
  • $AMBA I lowered the Stop on the stock piece to $25.01 (has a Collar but that doesn’t mean you get complacent)
  • $AVGO I will need to monitor the $57.5 level for the stock piece (bottom of PS protection is at that strike)
  • $CRR I exercised the long April $125 Calls & sold the stock. I then StO the April $140 Calls to make a short 135/140 CS. The short $120 Puts remain
  • $FRX A new position this week that has an April Collar
  • $IYR I had initiated a Risk Reversal for April but exited on 04/11 for a small loss
  • $PLUG I adjusted the April weekly Bear Collar to April 25 weekly
  • $SQQQ This portfolio hedge is capped so I will need to deal with that before Friday (april expiration)
  • $AIG I adjusted the April weekly Calls to the April 25 weekly expiration (short calls against stock in LT acct)
  • $XONE The Stop hit on the April $35 Puts on 04/07 so I am left with long $30 April Puts
  • $WFM I adjusted the April weekly Collar to the April 25 weekly expiration (50/52 Collar). That adjustment added $3.91 to the Options Net
  • $STKL I sold the April Calls and added a May 10/12.5 CS
  • $STZ I am short the April 85/77.5 Strangle (Earnings). There is a sell short stop set at $77
  • $FAST I am long the Apr/May 50/45 1×2 Diag Put Ratio Calendar (Earnings)

Submarine Basket (see Blog, just did a post earlier on that)


Here is the Summary:



Submarine Basket update

Just a little activity this week in the basket:

  • $FSLR I adjusted the April weekly Collar to next week Monthly $67 Collar
  • $GIMO The only new position I attempted to start (initial long at 17.45 on 04/09, 1/3 size) but ultimately closed on 04/10 for a $.20 loss
  • $PBR I adjusted the April weekly Collar to next week Monthly $13.5 Collar