Position Updates

A brief review of where my personal accounts stand coming in to December Monthly Options expiration:

Swing Account: $COV $KMX $MCD $PNC $RUSS $SWKS $UVXY

Long-term Account: $AIG $AVGO $DXJ $EA $IWC (new) $WAG


Submarine Basket: $AGCO $DNKN (new) $FDX (new) $TSCO $KR

Fab 5: $SWK $UNH $XRT $CELG $GILD (Note: $HD $PEP are positions held for clients)

Earnings: $DPZ $GIII $AZO $CONN $LE $RH $NKE


-DM 8:00 AM CST


A short-term Trade Idea in FedEx

$FDX had Earnings this morning and so far it has taken it on the chin. It is currently trading around the $166 level so I’ve been looking at a few different ideas for a short-term trade (this week):

1) December 165/167.5/165 Risk Reversal Call Spread for a small credit

2) Short the December 167.5/162.5 Strangle for a $2.50 credit

3) Short the December $165 Puts for a $1.60 credit


Carmax revving up into Earnings

One of the strategies for Option traders it to own lower IV Options and sell into an event that cause the IV to rise greatly (like Earnings). Sometimes it is ok to close an Option trade right before the event (take the $ and run so to speak).

As an example I have done just that with $KMX. Here was my initial trade:

  • December 57.5/62.5/55 Risk Reversal Call Spread
  • This means I was Long the 57.5/62.5 Call Spread and Short the $55 Puts
  • I had done this trade on 12/03 for an $.18 credit (takes margin)

Today I exited the Long $57.5 Calls thus leaving me with 2 Short Option pieces: the December 62.5/55 Strangle. As long as price stays within this range I will keep all the premium collected to this point: $3.28

If price gets above $60.78 then the exit was premature. If not, genius. LOL


Trading Activity

Activity for today in the Swing account and the Submarine Basket:

$KMX  With the IV continuing to elevate I elected to StC the December $57.5 Calls. This leaves a Short 62.5/55 Strangle for Earnings. Options Net improves to: $3.28

$MCD  I unwound the December 92.5/91 Put Spread. The short stock piece hit the Stop today. This leaves me with Short December $91 Puts (remainder of the Put Ratio). Options Net now: $1.54 & stock gains remain $2.97

$RUSS  I adjusted the Diagonal Collar to the 56/40 strikes. The Long ETF piece hit a Stop at $56 today so the Diagonal Collar became a Bear Risk Reversal. I set a Buy Stop at $43.50 (it did hit already) so back to a Diagonal Collar

$UVXY  I adjusted the Short December $27 Calls to a December 26w 30/24 Strangle (leaving the Short December $23 Puts as well for now). Options Net improves to: $4.70 & the gains on the Long ETF portion sit at $9.904

$DXJ  The Stop hit on the Long December $55 Calls. This leaves a Short January 58/51 Strangle. Options Net: $1.64

$AGCO  I added a Long January 45/40 Put Spread (protect Long stock) and Short December $45 Puts. Options Net now: -$.17

$F  I BtC December 26w $15.5 Calls (Submarine Basket) so this position is now closed


Earnings Trades update

Newly added this week that will survive to the weekend:

Krispy Kreme $KKD  I am Long the December 20/19 1×2 Put Ratio and short stock at $19 (hedge)

Lands End $LE  I own a January 50/40 Risk Reversal (post-Earnings)

Restoration Hardware $RH  I am Long the December 90/95 Call Spread (initial trade was a Call Ratio with Short Puts)

Autozone $AZO I am Long the December 580/590 1×2 Call Ratio with Long stock at $596 (hedge). Initial trade was a Call Fly with Short Puts

Conn’s Inc $CONN  I am Short the July $30 Puts and short stock at $22 (hedge)

Existing that survive:

  • $DPZ (no changes this week)
  • $GIII (no changes this week)



Earnings Prep for Adobe Systems

A few charts to start out with:


The above chart is an Revenue graph of $ADBE via @Estimize. Now for a look at the Daily chart with a Channel drawn:



This Channel provides a nice range to trade from for Earnings (AMC today). Here are a few Trade Ideas:

1) Long stock and Long the December 70 Puts ($1.75)

2) Jan/Dec 72.5 Call Calendar. Cost: $.80 debit

3) Jan 72.5/75/65 Risk Reversal Call Spread. Cost: $.18 credit (takes margin). What I would add here: Long December $65 Puts to make a Put Calendar. This changes the cost from a credit to a $.25 debit



Trading Activity

ProShares Ultra VIX Short-Term $UVXY  I sold the Long piece held overnight for a $.47 gain. The Risk Reversal Call Spread remains

Facebook $FB  I have unwound the Straddle Swap (Earnings trade) for a $2.61 credit. Options Net final: $2.90 & stock gains remains $2.75 (Earnings position now closed)

Restoration Hardware $RH  I have a December 90/95/100 1×2 Call Ratio with Short $80 Puts. I added a Long stock piece today (as a tag along for now) on the break of $97. I set a Stop at $97.50 on this piece


-DM 10:00 AM CST

Trading Activity

I have been mainly focused on Earnings trades today so far:

Krispy Kreme $KKD  I had noted that I would short the stock if it lost the $19 level and did so this morning. The Dec 20/19 1×2 Put Ratio remains

Francessca’s $FRAN  I am currently Short the December $15 Puts (post-Earnings)

Lands End $LE  I am Long the stock at $43.72 (post-Earnings)


Pinch Hitting using Options

There are situation where I prefer to close a stock trade and switch into using Options. By doing this I can accomplish several things:

1) Reduce capital exposure

2) Still participate in any additional price movement with a LOT less Risk

In the case of $FRAN today I did just that. I had a Long stock position from the pre-market bounce and wanted to book those gains (likely will fade at some point). With that in mind I closed the long stock piece and switched to a December $15 Risk Reversal (cost me $.57 at the time of the trade). This means I went Short the $15 Puts and Long the $15 Calls.

Once the fade did occur, I elected to StC the Long December $15 Calls for a $1.05 credit thus leaving the Short $15 Puts. I have a Sell Short Stop set at $15.25


StC = Sell to Close


-DM 10:50 AM CST