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:

SODA

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).

 

 

An Earnings trade review in Starbucks

We are now well into Earnings season and so there will be more info from me on trades for Earnings reports. I review each trade the same – whether it is deemed a success or a fizzle – to ensure that I am complying with my overall trading process.

There are not many traders that discuss trades that are deemed a failure so I thought I would do a blog post on how the $SBUX trade has played out. Here is the trade specifics:

SBUX

  • I am Long the July 25 weekly 80/82/83 1×2 Split Call Ratio. Another way to look at this is: I am Long the 80/82 Call Spread and short the $83 Calls as well = a 1:2 Long/Short Ratio
  • I am Short the July 25 weekly $77 Puts
  • This was done for a $.14 credit
  • This trade takes margin

Now on to the Daily chart to see how $SBUX reacted:

SBUX

A nice Doji for today (indecision) as traders negotiate for a new price for the stock after the Earnings report. For my trade, I can get very little value for the Long $80 Calls right here. The other 3 pieces are trading at a penny or two.

So the result is: I don’t get much more in additional value out of the trade beyond the initial credit – and I expect all 4 pieces to expire today. Was this trade a success? Not in terms of providing additional profit no. Did it allow me to participate for the potential reward? Yes.

I would also add one more thought here: keeping the cost down to a minimum (or even being paid to put the trade on, a credit) is a key element to my trading design. I accomplished that here so maybe it was a success after all … feel free to chime in with comments below.

Position Updates

This was a very typical Options expiration week with a few surprises along the way to my Plan posted last weekend. Aside from the focus on existing positions with July options, I did manage to add new positions that survive to the weekend: $CHL $INTC $KNDI $JPM $SWKS $CBI $GNRC.

Exits (primarily due to July Options expiration plan):

Earnings:

07192014

50/50 Basket:

Here is the Summary:

 

Positions_07192014

The Volume Bar buy signal

part of the Simple Approach series of blog posts

For traders that like to trade with simple triggers you may find this of interest. I use RSI and Volume Bars as Buy/Sell triggers and so I like to offer examples to show what I mean.

For an example using Volume Bars as a Buy signal I bring you $CAB:

CAB_volume_bars

As you can see above, I highlight several Buy points (blue vertical line). Here are the details:

1) Buy the next green Volume Bar – after at least 3 Red bars in a row

2) There have been 6 triggers so far with #7 in the works now

3) Use your own Stop and/or Risk parameters for exiting each trade that you would take

4) Trigger #4 is likely a loser

 

Position Updates

I did an update earlier this week summarizing the trading activity this week here and all the newly added positions survived to the weekend (exception is $LL but I already noted that it was exited).

Submarine Basket:

Earnings:

50/50 Basket update was done on the blog Thursday. No material changes on Friday.

Here is the Summary:

Positions_07122014

 

A trade idea in Acuity Brands

Acuity Brands reported Earnings on 07/01 and missed estimates:

Estimize Earnings page for $AYI

The reaction was negative as traders took profits or shorted the report. Here are a few looks at the Daily:

AYI AYI_B

As you can see above, price is hanging on to the 200 SMA right now (one Support level).

So what now? If you don’t currently have a trade, here is one idea to consider (if you think it will start a steady rebound into August):

  • Short the July 120/115 Strangle (takes margin)
  • Long the August 120/125 Call Spread
  • This trade can be done for a small credit
  • The margin use will go poof if price is in between the 2 July strikes at expiration

If the $120 level is too close for you then consider this:

  • Short the July 125/115 Strangle (takes margin but will be less than idea #1)
  • Long the August 125 Calls
  • This trade can be done for a small credit
  • The margin use will go poof if price is in between the 2 July strikes at expiration

Position Updates

Noted activity in the my personal accounts

Although this was a holiday shortened week, I was fairly active in the Swing account. Here are the newly added positions this week that survived to the weekend:

  • $ILMN   L July 175/185/170 Risk Reversal Call Spread
  • $VIPS   L August 200/220 Call Spread (LT account)

Exits:

Submarine Basket:

Earnings:

Here is the Summary:

Positions_07042014

 

Position Updates

a look at my Trading activity for my personal accounts

Here are the newly added positions this week that survived to the weekend:

  • $CTRP I am long stock at $56 with short July 60 Calls
  • $BWLD I own a July 160/165/155 Risk Reversal Call Spread
  • $SLB I own a July 03 weekly 110/116/110 Risk Reversal Call Spread
  • $ULTA I own a July 90/87.5 1×2 Put Ratio
  • $VRTX I am short at $102 with a July 90/90/100 Bear Collar Call Spread
  • $BBBY I own a July 03 weekly 56/57 Call Spread
  • $MPC I am long stock at $78.90 and short the July 03 weekly 80 Calls
  • $BKS I am short the July $23 Calls (2x) with a long stock hedge at $22 (and a Stop at 22.50)

Exits this week:

Earnings:

Submarine Basket:

Here is the Summary:

Positions_06272014

The Trade Process starring Accenture

In order to have a solid Trading Process a trader must be sure to evaluate each trade to see how it holds up to a variety of scenarios. For those that participate in Earnings trades this is especially important given that the reaction can often surprise.

I had decided to do a trade on Accenture ($ACN) for Earnings on 06/25 AMC:

ACN

Here is a breakdown of the trade:

  • I am long the June 27 weekly 83 Calls
  • I am short the June 27 weekly 85 & 87 Calls
  • This was done as a 1×2 Ratio
  • I am also short the June 27 weekly 78 Puts
  • This trade takes margin until Friday (or until the uncovered short pieces are closed)
  • This trade was done for a $.12 debit

The initial reaction this morning in pre-market action was positive but I still need a plan for exiting the trade with profit. I was surprised by a sudden fade in the stock price so I did the following as a next step:

ACN_B
This step – shorting stock to lock in some gains – has ended up being a much larger part of the profit in the trade as price has fallen to near the $80 level:

ACN_B

I have lowered the Stop on the short stock piece to $82 now (locks in $2.35).