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

Earnings:

  • $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:

Positions_04192014

 

Breakout

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?

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)

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)

Earnings:

Here is the Summary:

Positions_04122014

 

A look at the Measured Move starring Kindred Healthcare

Here is some basic info on the Measured Move:

MMNow let’s look at a Daily chart of $KND to see how a Measured Move is calculated:

KNDThe 1st Rising trend line has a move from $13.13 to $21.40 for a move of $8.27 to the 01/15/2014 highs. After the retracement to 02/05 lows ($17.58), a new uptrend began. If you take the $8.27 move from the 1st uptrend – and add to $17.58 – you get a target of $25.85 for this current uptrend.

Position Updates – 04/05/2014

A busy week in the Swing account as I was up to 12 positions at one point. The 4 swing trades that did not survive to the weekend:

  • $INSM I owned an April 17.5/20 CS that hit a Stop on 04/04
  • $KING I was bottom fishing in this new IPO with long stock. The position hit a Stop on 04/02
  • $MNKD I had a trade on from the FDA Panel event
  • $NUS This was a short stock trade from 03/24 that I let get called due to expiring Options that were ITM

Other notable elements to existing positions (including LT & IRA accounts):

  • $ALK CS is not capped anymore and will need to keep an eye on it to ensure I get some good value for it
  • $AMBA The Stop on the stock remains at $25.75 (has a Collar PS with a lower PS strike at $24) and I will likely lower the stock Stop next week
  • $APC The stock saw a huge move up over the $100 level on some legal settlement news. I adjusted the April long Puts way up to the $95 level for a very small debit. Now need to work on the Call side (likely move up to May soon as it is quite capped)
  • $AVGO The stock is still capped by short Calls. I added a PS this week to protect it
  • $CRR I adjusted the top of the CS up to the $135 strike
  • $SQQQ This portfolio hedge remains. I adjusted the long Put piece down to $54 on 04/03: SQQQ
  • $PLUG The April 11 Weekly $6 Bear Collar will need to be dealt with this week (Calls are ITM, protecting the short stock piece well)
  • $EWW This LT position continues to rebound well. I adjusted the short April $60 Strangle to May 02 Weekly $63 on 04/04
  • $AKS This April 7/8/6 Risk Reversal CS is working well as steel gets a bid
  • $SLCA I adjusted the Puts up to the $37 strike for the April Collar on 04/02

Earnings Trades:

$GIII
$KBH
$KMX
$MON
$NES
$NKE
$PVH
$RH

There is an Options Net/Cushion of $29.585 on the Earnings Trades Basket. There is one position with a stock hedge and that is $PVH. Exits this week in Earnings trades:

Submarine Basket:

Here is the Summary:

Positions_04052014

an Earnings trade review in Monsanto

Here is the trade that I initiated for Earnings in $MON:

  • Long the April 4 weekly $112 Puts
  • Short the April $110 Puts
  • This is a Diagonal Put Calendar
  • This was done for a .10 debit on 04/01 and takes margin

Let’s take a look at the Daily chart to see what happened post-Earnings:

MON_post_earningsPrice has worked within a range of just below $112 to $116 since the Earnings report this morning. My trade had only a Bearish bias to it so let’s take a look at some scenarios to see how it can play out:

1) Price stays near the $115 level. The Long weekly Puts will go poof Friday leaving me Short the monthly $110 Puts

2) Price falls down to $112 on Friday. I would get a little value for the Long weekly $112 Puts and would use that to protect the Short monthly Puts. I could also decide to just unwind the whole trade

3) Price miraculously craters to $110 on Friday. I would unwind this Diagonal Put Calendar

 

Protecting a long stock position with Options

Options can be a tremendous tool for a variety of situations. What I would like to discuss in this post is the use of an Option Collar to protect a long stock position. I currently have a long stock position in $QIHU – long at $97.80 since 01/31/2014 (for clients). I have done several Option trades in conjunction with this long stock and currently own an April 11 weekly $110 Collar:

QIHUIn this latest adjustment on 03/21 I Sold-to-Close the Mar $120 Puts I owned (expiration was that day) and added an April 11 weekly $110 Collar. This was done for a nice credit due to the long March Puts being In-the-money (ITM). The Options Net of $10.19 is booked gains on the trade.

So let’s take a look at what has happened since this adjustment:

QIHUAs you can see above on the Daily chart that the stock took a nosedive from the 50 SMA before finding some Support at this Pivot area on 03/27. The stock piece has obviously lost value but let’s see how the Collar has helped offset that loss:

closing bid/ask of the April 11 weekly Options on 03/28:

  • Short April 11 weekly $110 Calls:  $.55/$.75
  • Long April 11 weekly $110 Puts:  $15.10/$15.90

This Collar has 2 weeks until expiration.

Position Updates – 03/29/2014

I came into this week with heavier cash position (mostly driven by March Option trades being closed and being a little more cautious with a more nervous market). Earnings season is winding down but still found ample opportunities (several on a post-Earnings move). I was able to do several regular trades as well.

Here are the newly added positions that survived into the weekend:

  • $CRR I own an April 125/130/120 Risk Reversal Call Spread. The CS is currently capped
  • $INSM I am Long the April 17.5/20 Call Spread (initially did a stock trade after the Phase II data release for a gain of $3.22)
  • $NUS I am Short stock at 95.62 with an April 4 weekly $85 Bear Collar. The Short position is currently capped by the short Puts in the BC
  • $SQQQ I am Long the April 55/60 Call Spread (portfolio hedge). There is a $.87 gain on the ETF already booked (used the proceeds to help pay for the CS)
  • $STKL I am Long the April $10 Calls
  • $BOFI I am Long the April 85/90 Call Spread. There is a gain on the initial stock trade of $8.80 (submarine basket)
  • $PBR I am Long at 11.75 with an April 4 weekly $13 Collar (submarine basket)
  • $GIII I am Short the April 75/70 Strangle with a short stock piece (hedge). There is an additional cushion of $1.52 from the 1st stock hedge. Options Net: $4.75
  • $PVH I am Short the April 120/125 Strangle with a Long stock piece (hedge). I have done several hedges for an additional cushion of $4.72 & have an Options Net of $5.55
  • $RH I am Long the April 65/70 1×2 Call Ratio with a Long stock piece (hedge). This is currently 1.5x size & this is the 3rd trip with a long stock hedge (I have an additional cushion of $2.265) . Options Net: $.14

Exits this week (including newly added positions that were closed):

Current Submarine Basket:

Earnings:

Here is the Summary:

Positions_03292014