Earnings Trades update

Newly added this week:

Red Hat $RHT  I am Long the April 70/72.5 Call Spread (the short $62.50 Puts have already been closed). 1st week rule exception

PVH Corp $PVH  I own the April 105/110/115/95 Risk Reversal 1×2 Split Call Ratio (another way to view this trade: Long the 105/110 CS & Short the 115/95 Strangle). 1st week rule exception

Signet Jewelers $SIG  I own the April 130/135/120 Risk Reversal Call Spread. 1st week rule exception




- DM 10:00 AM CST



Trade Idea in Red Hat


Red Hat is heading into Earnings AMC on 3/25. One thing I notice on the Daily chart above is that CMF is taking a peek under the 0 line. RSI turned down at 60 and is near the 50 line.

For the relevant Option chain – April 2015 – the $72.50 Calls have the largest OI by far at just over 10K contracts. The April $67.5 Straddle is pricing in a $5.75 move so expect price to be out of the apex of this Asc Triangle in after-hours trading.

The trade idea is:   Long the April 70/72.5/62.5 RRCS (Risk Reversal Call Spread). This means you BtO the 70/72.5 Call Spread and StO the $62.5 Puts. You must be comfortable owning at 62.5 or have stock hedging as part of your overall trade plan. This trade takes margin (until you close the Short Puts).

AMC = After market close
OI = Open Interest
BtO = Buy to Open
StO = Sell to Open

- DM 10:10 AM CST


Earnings Trade: G-IIII Apparel Group

The trade specifics:

  • I am Long the Apr 115/120/105 RRCS. This means I am:
  • Long the Apr 115/120 Call Spread
  • Short the Apr 105 Puts
  • This trade takes margin (until the short Puts are closed)
  • This trade was done under the 1st week exception rule (this rule is in place for the 1st week after each Monthly Options expiration, I only want to do Earnings trades that have Weekly Options. There are times I make an exception)


- DM 10:30 AM CST


Earnings Trades update

Prior update can be found here

None of the newly added trades this week survived to the weekend. Exits this week (existing and newly added):

Here are the 5 existing that survive:

Netflix $NFLX  I am Long the April 02w 470/440/420 1×2 Split Put Ratio. I am Short stock at $440. No change this week

Google $GOOGL  I am Long stock at $525 (as of 3/6, let L Calls exercise) and Short the Sep $550 Calls (covered calls). No change this week

Centene $CNC  I am Long stock at $56 (2x size) and Short the September $67.5 Calls (covered calls, 2x size). Activity this week

Twitter $TWTR  I am Long stock at $41.99 with Short June $45 Calls (covered calls). No change this week

Cooper Companies $COO  I am Long stock at $175 and Short the April $180 Calls (covered calls). Activity this week


- DM 8:55 AM CST


Position Updates

My primary focus this week was in tending to existing positions that had March Options as part of the trade (Monthly OpEx this week). No new positions in the Swing, Long-term, or IRA accounts. No new positions in the Submarine Basket or 50/50 Basket.

Several Earnings trades were closed, I am left with: $NFLX $GOOGL $CNC $TWTR $COO

Submarine Basket:  $AXP $BBBY $BWA $EXPE $PNRA $RENT $WYNN $KR (not an official position since 8/18/2014 but trade is still on, still trending)

Here is the Summary:


- DM 8:35 AM CST


Cooper Companies – a trade update

I initiated an Earnings trade in $COO on 3/5/2015 (prior update can be viewed here):

  • Long the March 170/175/180 Call Fly
  • Short the March $155 Puts
  • This was done for a $.35 credit

One of the potential steps that exist in every trade is hedging with stock. In the case of $COO I had set a Buy Stop at $175 (middle of the Fly) as a hedge for the Top of the Fly (a short 175/180 call spread to keep it simple). The Bottom of the Fly is long 170/175 call spread.

The Buy Stop did trigger and the stock has continued to run up to the $185 level where it is consolidating. So now what?

In this scenario, I take the simple approach and do the following:

  • The Call Fly will go poof 3/20 for no gain
  • The Short Puts go poof on 3/20
  • I am left with a $.35 credit & Long stock at $175
  • Now I do this: StO April $180 Calls for a $8.70 credit on 3/17 to create a basic Covered Call trade


- DM 10:30 AM CST


An update to the trade in Williams-Sonoma for Earnings

I thought I would use the Earnings trade in $WSM as an example of how a trade can evolve as the market does. Here are the specifics for the initial trade I did early in the day on 3/18 for Earnings:

  • Long the March 82.5/85 Call Spread
  • Short the March 90/75 Strangle
  • This trade takes margin
  • Was done for a $.14 credit
  • The March $82.50 Straddle was pricing in a $5.50 move for Earnings

As the day wore on Thursday, the stock was weakening so I elected to StC the Long CS portion of the trade. This improved my Options Net to $1.41 but also meant that I had no directional bet any longer. I was left with a Short March 90/75 Strangle into the Earnings report.

The stock did react negatively in after hours on 3/18 to the guidance provided by the company (also a note RE: the West Coast port slowdown and how it will impact future Earnings).

So how does my trade look now? Price is currently trading near the $78.50 level so it has avoided my lower Short Put strike for now. As is always the case: it is about managing Risk so it is my job to know when to hedge with stock (if need be) or unwind the Short Puts as another potential step.


StC = Sell to Close

- DM 8:30 AM CST


Earnings Trades update

Last full update can be reviewed here.

Current Positions:

Netflix $NFLX  I am Long the April 02w 470/440/420 1×2 Split Put Ratio. The Long stock and Short Calls were closed this week. I have a Sell Short Stop set at $440 (again). Activity this week

Google $GOOGL  I am Long stock at $525 (as of 3/6, let L Calls exercise) and Short the Sep $550 Calls (covered calls). No change this week

Centene $CNC  I am Long stock at $56 (2x size) and Short the Mar $60 Calls (covered calls, 2x size). No change this week

Twitter $TWTR  I am Long stock at $41.99 with Short June $45 Calls (covered calls). No change this week

Buffalo Wild Wings $BWLD  I am Long the Mar 190/200/210 Call Fly and Short the June $195 Calls. No change this week

Boston Beer $SAM  I am Long the 260/270/280/290 Call Fly. No change this week

MercadoLibre $MELI  I am Short the Mar 135/140 CS & 130/125 PS. A Sell Short Stop triggered this week and that was covered on 3/10. Activity this week

Air Methods $AIRM  I am Short the Mar 50 & 55 Calls. Set a Buy Stop at $49 (hedge). Activity this week

AutoZone $AZO  I am Short the Mar 690/620 Strangle. BtC the Short Strangle. Options Net final: $21.48 & trade is now closed. Activity this week

Cooper Companies $COO  I am Long the Mar 170/175/180 Call Fly with Short $155 Puts. I am Long stock at $175 (hedge). Activity this week

Verifone $PAY  I am Long the March 33/35/37 Call Fly with Short $31 Puts (new)

Ulta Salons $ULTA  Initial trade: Long the March 145/150/130 RRCS. I have StC the March 13w $145 Calls so a Short 150/130 Strangle remains with a Buy Stop set at $153 (hedge). (new)



- DM 10:20 AM CST


Earnings Trades update

Several new Earnings trades this week that are still on:

Qihoo 360 $QIHU  I am Short the Mar 13w 54/43.5 Strangle. Options Net is: $.95

Habit Restaurants $HABT  I am Long stock at $32.30 (A/H dip buy)

Verifone $PAY  I am Long the Mar 33/35/37 Call Fly with Short $31 Puts

Vera Bradley $VRA  I am Long the Mar 17.5/15 1×2 Put Ratio. Options Net is: -$.25


- DM 10:50 AM CST