The Fab 5 update (mid-week)

I have quite a battle on my hands this week as both $HD & $UNH fight to get the Complete status (requires 3 days in a row with a close over $100). I have added $BMRN this week as a 6th man and have Short December $90 Calls sold against the stock (big Options Net gives me a large cushion to work with).

Here is the Summary:


-DM 9:50 AM CST

The Fab 5 update

I had 2 positions that put in at least a Day #1 on the $100 Roll this week: $PEP $UNH but neither were able to get a follow-on Day #2. United Health did manage to put in a new Day #1 to end the week (Friday). Home Depot is knocking on the door too. The $R stock position hit a Stop so only the Short December $95 Calls remain.

Here is the Summary:


Fab 5 candidates:

$EXPE (own now for some clients)


The Fab 5 update

Material changes to the Fab 5 this week:  I added Ryder System $R as a 6th man on 11/24 and I adjusted the Short Calls (covered calls) in $UNH to the January 02 weekly expiration.

Notable action: Pepsico $PEP gets Day #1 on the $100 Roll on Friday 11/28

Here is the Summary:


Fab 5 candidates:

$BG Bunge Limited
$ABC AmerisourceBergen Corp
$CVS CVS Health Corp
$ROST Ross Stores
$BITA Bitauto Holdings
$MNK Mallinckrodt
$AXP American Express
$AON Aon plc
$DIS Walt Disney
$SYK Stryker Corp
$AVGO Avago Tech Have a position in the long-term account right now
$MHFI McGraw Hill Financial

Trading Activity

Existing Positions:

Alibaba $BABA  I have done several things today: 1) added more Long stock (as a hedge) at $114.05 to go along with the Long stock at 112.70 I already have (so now a 2x size stock position). 2) I have adjusted 1x of the Short November 28 weekly $114 Calls up to $115 for a .47 debit. So the Call Ratio is now 110/114/115 for this week. Options Net is now: $.77

SPDR S&P Retail Index $XRT  I have adjusted the Short Calls to the December $93 strike (Fab 5). Options Net now: $.53


Palo Alto Networks $PANW  I was Long stock (post-Earnings trade) but have closed the stock position & switched to a December 05w 115 Risk Reversal

The Fab 5 update

I added $XRT this week to fill the 1 empty slot. I had added $AGIO on the break of $90 but it ended up being just a one-day trade (big pop & then faded some). It will remain on the candidate list. No material changes this week to the existing Fab 5 members.

I did take a Stop on the Long November 28 weekly $100 Calls in $GILD (continues to show weakness). There is a Buy Stop set at $104 as a hedge for the remaining short January $105 Calls.

Here is the Summary:


The Fab 5 update

I thought it would be a normal week for the Fab 5 but things got interesting on Thursday as $IBB started showing signs of weakness. I had elected to take $CELG out of the Fab 5 (but leave the trade on) but had to make a decision on adding Puts to make a Collar for November 28 expiration (weekly). I also had to adjust the $GILD position from stock/options to a Diagonal Call Calendar only – to avoid giving up any more gains on the long stock piece.

I added $XRT in the seat vacated by $CELG on 11/13 (a rare ETF in the Fab 5).

Here is the Summary:


Position Updates

Earnings season continues to wind down so I am shifting more of my focus back to normal Swing trading. I will still do Earnings trades but it will be greatly reduced now that there are a lot less opportunities each week.

Newly added this week that survived to the weekend:

  • RCS Capital $RCAP  I am long stock at $10 (after initially trading it short) as of 11/13 (Swing account)
  • Cyber-Ark Software $CYBR  I am long stock at $37.80 with a December 45/40/35 Collar PS (IRA account)
  • Altisource Portfolio $ASPS  I am short stock at $60 (covers the short November $60 Puts, Submarine Basket)
  • Ford $F  I am long stock at $14 with a December 05w 15.5/15 Collar (Submarine Basket)
  • Sanofi $SNY  I have a December 45/44 Risk Reversal with Short November $47 Calls (these are extra short Calls, Submarine Basket)
  • SPDR S&P Retial Index $XRT I am long the ETF at $90 (Fab 5)
  • Nordstrom $JWN  I am Short the November $75 Calls (2x) and Long the 72.5/70 1×2 Put Ratio. There is a Buy Stop set at $75.01 (2x, hedge). This is a LBW (look both ways) Earnings trade
  • BitAuto $BITA  I am long stock at $79.20 (Earnings trade)

Exits this week (existing or newly added that did not survive to the weekend):

50/50 Basket:  no material changes to report. Just one position still: Regulus $RGLS

Here is the Summary:


Trading Activity

Dow Chemical $DOW I added short November 14 weekly 50.5 Calls to create a weekly 50/50.5 CS. Options Net now: $.346 (this trade will expire today so will update when additional activity occurs)

Ford $F  I added a December 05 weekly 15.5/15 Collar for the long stock position (Submarine Basket) for a $.06 debit

Gilead Sciences $GILD  The Long stock piece in the Fab 5 hit a Stop on 11/13 leaving the short January 2015 $105 Calls uncovered. After the Hammer formed today (11/14) I have BtO (buy to open) the November 28 weekly 100 Calls ($3.36 debit) so now have a Diagonal Call Calendar. Options Net now: -$2.38 & stock gains of $18.75

Nordstrom $JWN  StC (sell to close) the Long November 72.5 Calls. This leaves me with Short $75 Calls (2x) and the Long Put Ratio. I set a Buy Stop at $74.5 (2x, hedge) and that did hit already:


I had noted yesterday here regarding the $CELG & $GILD positions so good timing on my adjustments.

Positions with weekly Options that I need to tend to today:

  • $SWKS (Submarine Basket). A 59/61/56 Risk Reversal CS
  • $APA (Swing account). The Long Calls go poof
  • $DOW (Swing account). Long a CS
  • $PCLN (Swing account). Long a 1125/1150 CS that should auto-exercise for +$25
  • $GPRO (Swing account). Long a 70/75/62 Risk Reversal CS. The CS should auto-exercise for +$5.00 and the short Puts go poof
  • $DXJ (Long-term account). Long $55 Calls (likely go poof)
  • $FB (Earnings). Short the $76 Straddle (part of a Straddle Swap)
  • $PEP (Fab 5, for some clients). Short Calls that are part of a Call Calendar


The Fab 5 update

For those that are not aware: the goal of the Fab 5 is to trade stocks that reach the $90 level with the expectation that the $100 level acts as a magnet. This is the $100 Roll.

No material changes in the Fab 5 basket this week. I did adjust 2 the Option pieces for 2 positions that had weeklys: $CELG $UNH.

Here is the Summary:


Fab 5 candidates:

  • American Express $AXP
  • SPDR S&P Retail ETF $XRT
  • iShares S&P 100 $OEF
  • Lennox Intl $LII
  • Ryder System $R
  • Centene $CNC
  • Illinois Tool Works $ITW
  • iShares S&P 500 Value $IVE
  • SanDisk $SNDK (own for clients)