Trading Activity update

Here is a list of my trading activity today:

$UVXY  I am short this ETF on the $40 break (Sell Short Stop trigger, a hedge for the short November Option trade)

$CELG  I initiated a new long stock Fab 5 position today (Buy Stop at $90 trigger)

$TSCO  The short stock piece in the Submarine Basket was covered today. The November option pieces remain

 

Market Vectors Oil Services

I have been looking for a bounce/reversal trade in this industry/sector but it continues to show weakness that can not be ignored. One perspective on this can be viewed on the $OIH Weekly chart:

OIH_Weekly

Several points to make:

1) RSI has drifted down to near 30 (oversold level)
2) Rising Volume as price plunged this Summer into the Fall
3) MACD is falling, weak
4) The 200 SMA is just below - it did manage to hold it on the last 2 tests of it

When looking at the Option chains, it is worth noting that the Top OI (open interest) by far in October is on the Put side ($52 Puts lead the way with 17,713 contracts).

Options – how to play for IV (Implied Volatility) decrease

One of the key approaches to Earnings trades is to sell elevated Options (high IV) because the expectation of what happens after: IV implodes after the event. To illustrate this concept I bring you a current trade in Synnex that I initiated yesterday for Earnings AMC 09/29:

  • I went short the $SNX October 65/60 Strangle for a $4.15 credit

This provided me a range of $55.85 to $69.15 to work with. Price did get above $67 in after hours but has settled back inside the Strangle range today (ideal). So now let’s take a look at the aftermath.

This is what happened today to the October Option chain:

SNX_Oct_Options_B

For a trade like this – where the goal is to sell the elevated premium – this is the result you are looking for. The Earnings event is over and the IV returns back to near normal levels.

For anyone that is in this trade, you have a few choices you can make:

1) Do nothing. As long as price stays within the 60-65 range, the Option values will continue to decay into Expiry in 3 weeks

2) Buy back the short premium for $2.20 here – thus booking a gain of $1.95

 

Position Updates – 09/27/2014

Since Earnings season has wound down to a trickle I have increased my focus on Swing trading into month-end. I also added a 1/2 size long position in $UGA to the Long-term account. I added 4 new Swing positions this week that survived to the weekend:

  • $CRR I am short at 70.08 and short the October/November 75/60 Strangle (2x on the Puts). I have an Options Net of: $4.58
  • $INVN I am short the October/October 03 weekly 20/21 Diagonal Put Calendar. I have an Options Net of: $.32
  • $JNS I am long stock at 13.44 with a March 2015/October 16/16/13 Collar PS. I have an Options Net of: -$.14
  • $LE I am short stock at 46 with an October 40 Bear Collar. I have an Options Net of: -$1.80

Newly added in the Submarine Basket this week:

  • $GNRC I have an October 42.5/45/40 Risk Reversal Call Spread
  • $TSCO I have a November 60/65/60 Risk Reversal Call Spread

No material changes in the 50/50 Basket this week

Earnings (newly added that survived to the weekend):

  • $AZO I own the October 510/520/530 Call Fly

The Summary:

Positions_09272014

 

 

Gaming the Options in GameStop

I have a position in $GME for the long-term account (since 05/22/2014). I currently own the following:

  • I am long the October 41/46 Call Spread
  • I am short the September 26 weekly 43 Calls (2x)
  • This created a Split Call Fly

Do what?

GME

The above graphic shows this latest trade adjustment where I decided to take advantage of the volatility this week to sell some premium. The goal here was to take in some Weekly premium that I thought had a good chance to expire – thus boosting my Options Net. This did not take margin.

Price is currently hovering below $43 so these short Calls have a great change to go poof (and I can then consider doing this again next week, etc).

Just one way to “trade around” a core position.

 

The RSI Buy signal starring InvenSense

part of the Simple Approach series

 

It appears that $INVN is in the “sell the news” category right now as it loses the 200 SMA today:

INVN

With that said, is there a Buy opportunity on the horizon after this capitulation? If you follow the RSI Buy pattern I say yes. It is worth eyeing for a bounce off of the $20 level soon – and that will likely coincide with RSI hitting the 30 level.

Ways to play a bounce:

1) Buy stock, use your Stop setting

2) Sell Puts

3) Buy Calls

4) Combine #2 & #3 to make a Risk Reversal

5) Sell a Put Calendar

6) Buy a Call Calendar

Positions Update – 09/20/2014

A very active week on the news/event front with the Scottish Independence vote, the Fed, and the $BABA IPO. What kept me busy however was the September monthly Options expiration. I had to tend to most positions as the majority had September options as part of the trade so that is where my focus was this week.

Some notable activity in existing positions as well as a couple of newly added ones:

  • $COL I had BtO the October $75 Straddle on 09/16 due to my feeling that the Options were very cheap. The news on Friday helped to give some direction on which side was going to win
  • $DRC I have owned an Option trade since 08/15 due to some very large Option volume that was growing in the September Option chain. Big news this week to pop the stock over the $80 level (have long stock as well)
  • $PEIX I was long stock with an October Collar coming into this week. Boy did things change. I let the stock piece hit a Stop at B/E on 09/15 which meant the Collar became a Bear Risk Reversal (I as short some September 17 Puts which I adjusted to October so now a BRRPS). The market changed its mind – so I did too
  • $SLXP was a big surprise for me on the Dip Buy. A much larger bounce than anticipated
  • $YHOO I shorted this on Friday as it seemed that it was an obvious trade now that $BABA was going to be trading – and Yahoo gets its cash (a lot of debate should now ensue on the value of Yahoo as a business)

50/50 Basket:

  • $DGLY I am short stock at 21.75 (since 09/15)
  • $TKMR I am short stock at 25.04 (since 08/11) with a Diagonal Bear Collar Call Spread (L October 17.5/25 CS, S December 17.5 Puts)

Earnings Trades:

  • $JCP I am Long the January $10 Straddle & Short the October 03w 11 Straddle (a Straddle Swap)
  • $RRGB I am Long stock at 49.90 and Short the December 60/55 Strangle
  • $TSL Long the October 14/15 Call Spread (for some clients)
  • $MOV Long the October 45 Calls (was part of a Call Calendar, will make a Call Fly soon, for some clients)

Submarine Basket:

09202014

Here is the Summary:

Positions_09202014

 

Positions Update

Newly added this week that is still on:

  • $BK I have the October 03 weekly 40/39.5 Risk Reversal
  • $COL I am long the October 75 Straddle
  • $GPRO I keep doing Put Fly trades each week (with S Calls usually). What is left right now: Short $66 Puts (2x) with L 65 Puts & Short 77 Calls for September. There is a cushion of: $5.22 to work with
  • $SLXP I am long stock at 144.85 with an October 160/160/145 Collar PS
  • $LVS I have the September 61/62/59 Risk Reversal Call Spread (Submarine Basket)
  • $FDS (Earnings)
  • $ADBE (Earnings)
  • $FDX (Earnings)
  • $RAX (beat up, no M&A now)

Most of my Trading efforts have been on executing my plan for the existing positions that have September Options (you can see some info on this here)

 

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

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.