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:


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.

A trade idea breakdown in John Deere

A Put Ratio in $DE using the September 26 weekly Options:

I would be looking for the $82 Puts to get ITM (in the money) by expiration


A few scenarios to consider:
1) Price is at $81 at expiry. I would let the 82/81 Put Spread auto-exercise for a $1 credit.
2) Price is at $80 at expiry. I would let the 82/81 Put Spread auto-exercise for a $1 credit. I would then evaluate if I want to be Put stock at $80 or not. I could consider adjusting those short $80 Puts to a future expiration as a possible step.
3) Price is at $85 at expiry. The Put Ratio goes poof.

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.


Position Updates

Newly added this week that survived to the weekend:

  • $IRF  I tagged along in the September 30 Calls on the M&A rumors (deal was eventually announced later in the day). Options Net: -$.72
  • $MNST  A “to fade” setup. I am currently short the Oct/Sep 85 Put Calendar. Options Net: $1.05
  • $VXX  I am long the ETN at $27.90 and short the August 29 weekly 28/27.5 Strangle. Options Net: $2.05
  • $JRJC (50/50)
  • $PBYI (50/50)
  • $HAIN (Earnings)
  • $INTU (Earnings)
  • $RDEN (post-Earnings)
  • $ROST (Earnings)
  • $SMTC (Earnings)

The Long Term position in $GME acted well after Earnings. The remaining $CBI position in the Submarine Basket is the short October $60 Puts (the short stock piece hit a Stop for +$2.50). $KR is no longer an official SB position but the trade still remains with a 3% Trail Stop. The $BIOF position in the 50/50 Basket hit a Stop.

Most of my activity was in Earnings Trades:


Here is the Summary for Swing, LT, IRA accounts:


Position Updates – 08/09/2014

I was not as active in the markets this week with new trades as I focused on managing existing positions. However, I do have some Newly added that survive to the weekend:


Submarine Basket:

50/50 Basket:

Here is the Summary:


Options Expiration day – a look at Pioneer Natural Resources

For those familiar with Option trading you will find the following graphic of no surprise:


Bid/Ask spreads. Ugh.

I am currently short the $230 Calls (2x, left over from a Call Ratio) and short the $205 Puts. One of the challenges on expiration day is to have the patience to let the bid/ask spread tighten so that you can close an Option in a reasonable way.

At the moment price is above $206 so the short Puts are OTM (out of the money). I obviously would prefer to not pay to buy them back (BtC – Buy to Close) and instead have them expire worthless. It seems the short Calls above will have no problem doing that :)

Position Updates mid-week review

Newly added this week that still remain (or the remaining pieces):

  • $ELLI I am long stock. Swing
  • $REGN I am long the August 08 weekly 315/335 Call Spread. Swing
  • $WYNN I have an August 08 weekly 202.5/205/197.5 Risk Reversal Call Spread. I am short stock as a hedge on the Puts. Swing
  • $TGT I am long stock at $58 (1/4 size) and short the August 59/58 Strangle & August 08 weekly 57.5 Puts (1/4 size of each). Submarine Basket
  • $PXD I am short the $230 Calls (2x) and $205 Puts. I am short stock as a hedge on the Puts. Earnings
  • $FSLR I am long the August 64 Calls and short the August 08 weekly 52.5 Puts. Earnings
  • $ATVI I am short the August 08 weekly $24 Calls (2x) and long the 22/21 1×2 Put Ratio. Earnings
  • $Z I am long stock at 134.72 with an August 145/140/130 Collar Put Spread. Earnings
  • $CF I am short the $260 & $265 Calls as well as short the $242.5 Puts. Earnings


Position Updates – 08/02/2014

We ended July with a big RED day and have started out August with a lot of continued indecision along with more distribution. I focused mainly on Earnings trades this week but did find a few opportunities for the normal accounts. Newly added that survive to the weekend:

  • $PCYC (a new trade this week in the Swing account)
  • $GRMN (Submarine Basket)

Exits this week (including newly added that did not survive):

50/50 Basket:

Submarine Basket:



Here is the Summary for Swing, Long-term, IRA accounts:




A look at Bear Collar protection starring my Sodastream trade

I often like to discuss a trade topic using a real live trade and thought I would highlight the current $SODA trade I have on. Here are the specifics:

  • I am short stock at $36 from 07/24 in the Swing account
  • I own an August 01 weekly $31.5 Bear Collar
  • Options Net: -$.83

Now that the Earnings event is over let’s take a look at the Daily to see where price is:


So far a nice bounce with the 50 SMA just above to offer some resistance. So how is the Bear Collar helping my position? Let’s see how the Options are priced right now:

  • The short $31.5 Puts are OTM now, last trade was $.30
  • The long $31.5 Calls are several strikes ITM now, last trade was $1.43

So the short stock piece is protected on any gain in price above $32.33 (31.5 Call strike + .83 the current Options Net). This locks in a gain of $3.67 (36 – 32.33).