Position Updates – 09/13/2014

Exits this week:

  • $GPRE I was long a September Call Spread
  • $GPRO I was long a weekly Put Fly
  • $IRF I was long September $35 Calls
  • $VXX I was long the ETN at 27.9 (since 8/18) and kept selling Straddle/Strangles each week
  • $WYNN I was long stock with a weekly Collar PS
  • $KNDI (IRA)
  • $PBR (IRA)
  • Earnings:
  • $BITA I was long stock at 62.85 with a Diag Collar PS that was unwound on 09/10. Options Net/cushion final: $21.86
  • $BMO I was long the September $75 Calls for some clients. I closed the position on 09/08
  • $DRI I was long the September 48/49/50 1×2 Split Call Ratio into Earnings. Trade was closed on 09/12
  • $GIII I had a remaining short September 95/75 Strangle that was closed on 09/11. Options Net/cushion final: $5.63 (Earnings)
  • $HAIN I was long the September 90/95 Call Spread that was closed on 09/09
  • $LE I did a Pre-market long stock trade on 09/11 post-Earnings
  • $RDEN I was long stock at 14.92 and short the September $15 Straddle. The stock was called away so I closed the short Puts. Options Net/cushion final: $4.48
  • $RH I did an After Hours stock trade post-Earnings
  • $TITN I was short the September $12.5 Straddle (Earnings). Trade was closed on 09/10

Here is the Summary:

Positions_09132014

Position Updates – newly added this week

Newly added this week that is still on:

$GTAT L Sep/Sep 12w 18/17 Strangle Swap with extra Short September 22/14 Strangle. I am short stock (from 16.12) as a hedge. If price stays under $14 then I will let the stock piece get unwound for me. The short weekly $18 Calls will go poof. This would leave me Long the September 18/22 CS & 17/14 PS. Options Net: $.21

$VNET I am long stock at 14.92 with a September 22.5/21 Collar

$MBLY I have a December 55/50 Risk Reversal in the IRA (replaced $KNDI this week)

$CONN I am long stock at 29.15 and short the September 30 Straddle (Submarine Basket). Options Net: $1.80

$KKD LBW was the original trade. What is left: I am long the September 18/19 1×2 Call Ratio & short the 16 Puts (2x). Options Net: $.70 (Earnings)

$PANW I am long the September 12 weekly 90/95 1×2 Call Ratio with long stock at $95 (hedge). The plan is to let the CS auto-exercise and the long stock will get called away via the extra short $95 Calls – as long as price stays above $95. The short $85 Puts should go poof. Options Net: $.35 (Earnings)

The LBW (Look Both Ways) trade – a review of a Restoration Hardware earnings trade idea

I had offered a trade idea for $RH into Earnings and thought I would list a few potential exit paths to take if you executed this trade. Here was the trade idea:

  • LBW
  • Long the September 85/90 1×2 Call Ratio
  • Long the September 80/75 1×2 Put Ratio
  • At the time I posted the message this trade cost $.60
  • This trade would take margin (at least until the “extra” short Option pieces were closed)

Now that Earnings is done, price has settled around the $78.50 level so the Put Ratio side of the trade is winning. So now what?

For most traders, taking off the Put Ratio is the step they would take. However, it is often the case that price never probes the bottom of the Ratio so leaving the premium to expire is worthwhile.

To help with a visualization of this trade, consider looking at the Put Ratio in a different way:

  • Long the September 80/75 Put Spread
  • Short the September $75 Puts
  • Treat these as 2 separate trades

If you think price holds in this area until expiration then you would sell the Put Spread when you feel it has found a solid floor. You would then place a Stop on the remaining $75 Puts that you are short with the goal of them expiring worthless. You may even be ok with being Put stock at $75. If price does hold in this area, the Call Ratio obviously expires worthless at expiration too.

Your trade, your process.

 

Disclosure: I did not execute this trade before Earnings. I did trade the stock in after hours though – after the report.

Position Updates

This was a holiday-shortened week but I still was active in some areas of my trading. Here are the newly added positions that survived to the weekend:

Exits (existing or newly added this week):

Submarine Basket update (video)

Earnings Trades:

50/50 Basket positions (has really heated up over the past 30 days):

Here is the Summary:

Positions_09062014

 

Note: While doing my Position Updates last week, I failed to update some of the Long-term account info. I had inadvertently left off $COW last week in the long-term account as a new position and also did not show the Option activity for $GME.

A trade review in G-III Apparel

I often get questions on the Option Ratio trades for Earnings that center around the exit of the trade. One of the key elements to the trade is the flexibility you get after the earnings event so it is important to know ahead of time what you will do in any scenario.

I thought I would use a current trade in $GIII to show one of the more ideal scenarios for price to follow. Here are the specifics on the initial trade:

  • Long the September 85/90/95 1×2 Split Call Ratio with short $75 Puts
  • This means I am long the 85/90 Call Spread & short the 95/75 Strangle
  • This trade was done for a $.15 debit
  • This trade takes margin

After the earnings report the stock made a run over $90 but stalled. My normal approach is to sell the only long piece of the trade: Long Calls. By doing this I am left with all short Option pieces with the plan being they would expire worthless. In this trade I just need to monitor the $75 & $90 price levels for a potential hedge (or buy them back if they get really cheap). I normally do this with Buy or Sell Short Stops.