Tractor Supply – a look at an existing position into Earnings

I have had a position in $TSCO for the Submarine Basket since 09/25/2014. Here is the current position info:

TSCO

I received a few comments today about letting the Long stock position stay “capped” into Earnings. If you review the chart above, you can see that my priority should be to protect the recent gains. It has had quite an UP move from the October lows so it is my view that the risk may be to the downside now.

If I am wrong? No harm no foul. I can sell premium in a future expiration to buy back the Short $80 Calls at February expiration. The Put Ratio would go poof.

Worth noting: I have an Options Net of $1.10 & accumulated booked stock gains of $7.07 up to this point.

 

- DM Noon CST

 

The Early Bird starring Illumina

One of the key elements to trading Earnings events is the fact that you can plan for it – it is a known event. There are certainly a variety ways to construct a trade to take advantage of an expected move but one of the lesser discussed approaches is this:

Put the trade on early with Options – when premium is less expensive – and then manage the trade if it runs up into the Earnings event. There is no written rule that says you have to hold such trade through the event.

I have taken such approach with a trade in $ILMN by initiating the following trade:

  • Long the January 30 weekly 195/180 Risk Reversal
  • This means I am Long the $195 Calls and Short the $180 Puts
  • This trade takes margin (at least until the short Puts are closed)

I did the above trade on 01/22 for a .59 debit when price was near $190. It closed at $197.16 on Friday so the Calls are already ITM (in the money). Here is a Daily chart:

ILMN

- DM 11:00 AM CST

 

The Outerwall is crumbling

I still don’t get the name change for $OUTR but that’s not what this post is about. Yesterday it was announced that CEO had resigned (from the Board too) and the stock subsequently crumbled below the flat 200 SMA.

Here is a Daily chart showing the mild attempt to bounce today:

OUTR_B

As RSI is probing the 30 level – and reviewing the past history for price behavior when this happens – I have been keeping an eye on the stock for a potential new trade in the Submarine Basket (for more info on this Basket, just search this Blog).

One of the most frequent trades I construct is the RRCS – the Risk Reversal Call Spread. With this trade structure I am:

  • Long a Call Spread
  • Short Puts (takes margin until this piece is closed)

With that in mind, let’s look at a few different trade choices:

  1. Long the February 65/70/55 RRCS. Must be comfy owning at $55 (and/or hedge with stock if need be). This trade costs: $.35 debit
  2. Long the February 65/70/75 Call Fly with Short $55 Puts (1/2 size on the Puts) for EVEN. Must be comfy owning a 1/2 size position at $55 (and/or hedge with stock if need be)
  3. Long stock at $63 and Long the March $65 Puts. Once the stock starts to run up, sell Call premium to cover the initial cost of the Puts (expensive right now at $6)

 

Some perspective on Union Pacific

One of the important aspects of trading is technical chart review. Even if you don’t agree – perhaps you only trade on Fundamental data – the review of a stock chart gives you perspective on what ALL market participants think.

Price.

With that in mind, I took a few minutes to review the Daily chart of $UNP with a few different perspectives:

UNP UNP_B UNP_C

 

- DM 9:00 AM CST

 

Position Updates

The focus this week was in managing existing positions that had January monthly Options as part of the trade. One of my oldest positions was closed this week: $AIG (long-term account). I did add a few new positions:

  • $PCP a RRCS for the long-term account
  • $FMI a short for the Swing (has a Bear Collar)
  • $FXCM a short for the Swing (exited in A/H 01/16 as it was finally un-halted)
  • $RMD a long stock position in the long-term account
  • $FDX a new long in the Submarine Basket (a revisit after exiting a position earlier in the week).

There are no positions in the 50/50 Basket.

I end the week with just one Earnings trade: $SLB.

My $VXX related trade is a Long $UVXY position I have had since 01/02/2015 (so, no $VXX weekend trade this week).

Submarine Basket:

  • $AGCO
  • $BBBY
  • $DNKN
  • $FDX
  • $TIF (this is a short-term Short Stock trade as it probes for a solid bottom)
  • $TSCO
  • $KR (trade still on but has been an official SB position since 08/18)

Here is the Summary:

Positions_01172015

- DM 11:00 AM CST