A few newly added positions survive the week:
- $ITT I am long stock at $41.49
- $SQQQ I am long this ETF at 15.70 (a hedge)
- $ADT I am long stock at $40.15 (1/4 size) and short the December 40 Straddle (1/4 size each, Calls are covered)
- $FNSR I am long stock at $20.669
- $WDAY I am short the December 80/65 Strangle (Earnings)
- $CBRL I own the December 115/120/105 Risk Reversal Call Spread (post-Earnings)
- $BLOX I am short the December 35 Puts (1/2 size) and short stock (as a hedge, have done several) at $32. Trade cushion stands at $5
Exit of existing position (including newly added this week):
Current Submarine Basket:
Here is the Summary of normal Swing & LT positions:
A lighter list this week:
$CTSH I own the weekly 93 Puts. These Puts are currently OTM so they look to expire worthless
$TWTR I own the weekly 42/42.5 Call Spread. This CS is currently OTM so it looks to expire worthless (but this could change)
$EBAY I own the weekly 49/50.5 Call Spread and short the 50 Puts. The 49 Calls are ITM so I will get value from the today. The Puts are OTM but will still need to monitor. These are 1/4 size positions each
$CRM I am long the weekly 56 Calls which will go poof today
$JCP I am long stock, short the weekly 8.5 Calls & long the weekly 9/8.5 Put Spread. I will let the stock get called away, the PS goes poof (price is hovering around $10 today, a Pin)
ITM = in the money
OTM = out of the money
In order to have a proper trade process, a trader needs to determine ahead of time what their Stop is going to be on a trade they execute on. There are certainly a LOT of different approaches here but I thought I would provide a few different perspectives on what you can do if entering $FFIV right here.
First, a normal Daily chart:
As you can see in the chart above the 50 & 200 Simple Moving Averages loom just above as some Resistance so worth noting that. Now let’s take a look at a Rising Trend line below and how to use that for a potential Stop setting:
If this is your chosen perspective then you would go long stock here and set your Stop at $80. If you like to protect against mild overshoot moves, then try $79.50
Next is a busier chart showing some Gap Fill areas:
If this is how you see it then you would use $78 as your Stop – a Double Bottom pullback that holds. That is quite a down move for me but may very well be within your threshold.
Now I will change the lens again and show a Support line that has had some action several times this year:
If you think this Pivot area would hold then your Stop would be set at $79.50
One of the strategies to trading an Earnings catalyst is to actually wait for the post-Earnings move – and then construct a trade. I did just that in $BLOX today:
This was the second trade that I have done post-earnings (the first trade I was long stock overnight).
My approach in this trade was still the same though – wait until I thought there was a good bottoming process occurring. Once I felt that was the case this morning, I elected to sell the December 35 Puts for $2.30 credit (1/2 size position to start).
One key step in my process however is to monitor the price action to make sure that it does not breach the strike level (in this case $35). Once it did, I went short stock at $34.80 as a hedge on the short Puts. This usually affords me a minor cushion when price over-shoots a level. However, price continued to erode so the hedge ends up being VERY important in this trade as it is protecting the short December Puts.
Price has just fallen through the $33 level – the stock is down over 25% now. Yikes.
So what next? Let’s look at a few scenarios:
1) The stock stalls at $33 & finally finds a bottom. I would cover the short stock hedge for a $1.80 gain. This would bring the overall cushion in the trade to $4.10 but I would still be short the December 35 Puts (ITM) so I would only do this step if I anticipate a recovery to that strike level by expiration
2) The stock rebounds to $35. No harm no foul. I would cover the short stock hedge and leave the short December Puts alone
I have been active in this Basket of stocks this week so I thought I would get the list up-to-date:
A few positions to make a note on:
$EBAY I now own the Weekly 49/50.5 Call Spread and short the 50 Puts
$GTLS This has been a wild one but the bounce has worked quite well. I am currently capped (so can get called at any time) but I do have a significant Option cushion to work with
$HTZ I used some of the large Option cushion to make a Put Spread (gets rid of the downside Risk from the original short $22 Puts)
I make an effort to understand (at least be aware of) other chart styles that exist because it makes sense to know how other market participants may be trading. One such chart style is the Point ‘n Figure chart and I thought I would show an example today of $PCLN:
Priceline had a Double Top Breakout on November 20 that adjusted the PO (Price Objective) to 1370. As you can see from this chart, you have had very little reason to sell as it has held way above the Rising TL since $680.
You can read a LOT more on PnF here
One of the key elements to my Trading Process involves the selling of Option Premium. There are a variety of scenarios where I incorporate Options with stock in an overall trade, but there are situations where I just want to sell Options (I take a Neutral stance, don’t care on direction at all).
When it was announced that $TWTR would be offering Options for trading on 11/15 I devised a plan on what I wanted to do. I ultimately decided on selling a Straddle:
The goal is simple here: I want the price to stay within a range of $39.97 to $45.03 by Friday expiration (Straddle price +/- Option cushion). Here is a Daily chart showing the price range I am looking for by Friday expiration:
Here are a few scenarios that show what my next step would be:
1) Price continues sideways into Friday expiration. I would buy back any “winning” piece cheap & resell a new Straddle for the December 6 Weekly expiration. This would increase the Option cushion
2) Price falls to $41 into Friday expiration. I would buy back the “winning” Puts & resell a new Straddle for the December 6 Weekly expiration. Depending on the strike(s) chosen, this could increase the Option cushion
3) Price rises to $44 into Friday expiration. I would buy back the “winning” Calls & resell a new Straddle for the December 6 Weekly expiration. Depending on the strike(s) chosen, this could increase the Option cushion
Note: This trade takes margin. There also may be situations where I hedge with stock (any breach of $40 below or $45 above).
There were no changes to the Fab 5 this week. I still have 4 positions that have Completed the $100 Roll & are holding the gains well.
Here is the Summary:
A few candidates:
I have several newly added positions this week that will survive into the weekend:
I had a significant number of positions with Weekly Options expiring today. I wrote a brief Blog post here with the plan.
Trade (or partial trade) exits this week:
- $WLT I sold the Long stock piece in the LT account. The December 17.5/14 Put Spread remains. The Short weekly 17 Calls will go poof
- $BIIB This was a “to fade” trade. Day-trade only
- $HD I am short the Weekly 81/78 Strangle (Earnings). I expect this to go poof today
- $SINA I am short the Weekly 80 Calls (Earnings). I expect this to go poof today
- $GMCR Position in the Submarine Basket that I held through Earnings
- $ONVO This was a “to fade” trade
Current Submarine Basket:
Earnings Trades that remain:
I made several adjustments to existing positions. Here is the Summary:
I have several existing positions with Options as a part of a trade that expire this week. Here is a brief rundown:
- $JCP I am short the 8.5 Calls (was part of a short straddle for Earnings). These are covered by stock and I will likely let it get called away – keep the Option premium gains ($.67 currently)
- $GMCR I am short the 52.5 Puts (part of Earnings trade). Will go poof
- $TMUS I am long stock and short the 26.5 Calls. Will sell premium for next week, buy these back if need be tomorrow (currently just a hair OTM)
- $IOC I am long the 92 Puts (protecting long stock). Will sell tomorrow for good value
- $TSO I am long stock and short the 55 Calls against long stock. These are ITM so will need to sell premium further out to buy these back tomorrow if need be (that is the plan, keep adjusting & collecting more premium)
- $CSCO I am long stock and short the 21.5 Calls. Will need to monitor as they are near ITM
- $T I am long stock and short the 35 Calls. Will need to monitor as they are ITM
- $WLT I am long stock and short the 17 Calls. These will go poof, keep all premium collected
- $SINA I am short the 80 Calls (left over piece from Earnings trade). These look to go poof, keep all premium collected)
- $CRM I am short the 56 Straddle (Long other expiration of same) so I need to address the Put side by Friday expiration
- $HD I am short the 81/78 Strangle (Earnings trade). Should go poof Friday, keep all premium collected