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

 

Position Updates

New this week that survives to the weekend:

  • $UNP  I am Long stock at $113 and Short the January 2016 $120 Calls
  • $FXCM  I am Long the February $2.50 Calls (IRA)
  • $BWA  I am Long stock at $51.40 with a February $55 Collar
  • $LYB  I am Long the February 80/85/90 Call Fly and Short the $72.5 Puts
  • $UPS  I own the February 06 weekly $103 Risk Reversal

50/50 Basket:

No positions

Earnings:

see Blog post from Friday afternoon 01/23

Submarine Basket:

see Blog post from Friday 01/23

 

Here is the Summary:

Positions_01242015

- DM 9:30 AM CST

 

Earnings Trades update

Now that Earnings season is in full swing, there will be increasing activity/focus on trades in this category. Here are the new trades this week that will survive to the weekend:

Netflix $NFLX  I own the January 23 weekly/June 345/395 Diagonal Call Calendar. I will take stock at $345 at expiry this week. I will adjust the Short June $395 Calls at some point soon

SanDisk $SNDK  I am Short the March $80 Straddle (1/2 size each) and Long stock at $78 (full size, hedge on 1/2)

Illumina $ILMN  I own the January 30 weekly 195/180 Risk Reversal (this is an early Earnings trade, reports next week)

Lands End $LE  I am Short the February 35 Puts (left over from the post-Earnings trade, the Long CS has been closed)

Existing:

Schlumberger $SLB  I remain Long stock at 77.053 & Short the February 06 weekly 82.5 Calls

 

- DM 3:00 PM CST

 

Earnings Trades update

$SLB  I remain Long stock at $77.053 and Short the February 06 weekly $82.50 Calls (covered)

$NFLX  I am Long the January 23 weekly $340 Calls & Short the June $395 Calls. I will take the stock at $340 at expiry tomorrow

$SNDK  I am Long the January 23 weekly $80 Calls & Short the March $80 Straddle (1/2 size on March pieces). I have set a Buy Stop at $78 (would be a hedge)

 

- DM 10:30 AM CST

 

 

Trading Activity

Reminder: The activity noted here is in Personal Accounts unless I specifically note a trade is/was for clients.

Activity:

BioMarin Pharma $BMRN  The Long stock piece hit a Stop on 01/21 leaving me with Short February $100 Calls. I elected to add additional Option pieces for February to create a Call Fly. Options Net shrinks to: $4.89 and stock gains: $5.84 (Fab 5)

United Rentals $URI  I am Short the March $82.5 Puts (2x size). I went Short stock post-Earnings on the $90 break

F5 Networks $FFIV  I am Long stock at 108.35 (post-Earnings Dip Buy, 1.5x size). This hit a Stop at $113.75 for +$4.82 so the position is now closed

SanDisk $SNDK  I have StC the January 23 weekly $80 Puts. The Long weekly $80 Calls remain as well as the Short March pieces (1/2 size on these). Buy Stop is set at $78 (would be a hedge). Options Net is now: $4.81

 

StC = Sell to Close

- DM 10:00 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

 

Earnings Trades update

I initiated 4 new Earnings trades this week: $SNX $KBH $PPG $SLB. The $SNX & $KBH positions have already been exited.

This is what I have left today (only $SLB will survive to the weekend):

Acuity Brands $AYI  This is a trade from last week that remains: I am Short the January 155/130 Strangle. This should go poof today. Options Net currently: $5.75 & Stock gains of $2.14

PPG Industries $PPG  I am Short the January 230/220 Strangle. This should go poof today. Options Net currently: $4.15

Schlumberger Limited $SLB  I am Long stock at $77.053 average (A/H buys on 01/15)

 

- DM 10:00 AM CST