Trading Activity

Activity this morning:

Mattel $MAT  Bought the Dip on the pre-lim guidance & CEO departure news. After selling the stock I initiated a Long February 26/28/25 RRCS for a small debit. I have since StC the Long $26 Calls leaving a Short 28/25 Strangle for February. I have set a Buy Stop at $27.90 (would be a hedge)

Bed Bath & Beyond $BBBY  I have adjusted the Long Feb Puts up to the $75 strike (Submarine Basket)

United Parcel $UPS  I have added Short Stock at $102.06 (downgrade news in P/M, this is a hedge, Submarine Basket). I have StC the February 06 weekly $103 Calls for .88 credit thus leaving me with Short $103 Puts for the same expiry

Netflix $NFLX  I have adjusted the Short Calls (covered) to the September $420 strike for a credit. Options Net improves to: $5.20

 

RRCS = Risk Reversal Call Spread
StC = Sell to Close

- DM 10:00 AM CST

 

The Early Bird starring Illumina

One of the key elements to trading Earnings events is the fact that you can plan for it – it is a known event. There are certainly a variety ways to construct a trade to take advantage of an expected move but one of the lesser discussed approaches is this:

Put the trade on early with Options – when premium is less expensive – and then manage the trade if it runs up into the Earnings event. There is no written rule that says you have to hold such trade through the event.

I have taken such approach with a trade in $ILMN by initiating the following trade:

  • Long the January 30 weekly 195/180 Risk Reversal
  • This means I am Long the $195 Calls and Short the $180 Puts
  • This trade takes margin (at least until the short Puts are closed)

I did the above trade on 01/22 for a .59 debit when price was near $190. It closed at $197.16 on Friday so the Calls are already ITM (in the money). Here is a Daily chart:

ILMN

- DM 11:00 AM CST

 

Position Updates

New this week that survives to the weekend:

  • $UNP  I am Long stock at $113 and Short the January 2016 $120 Calls
  • $FXCM  I am Long the February $2.50 Calls (IRA)
  • $BWA  I am Long stock at $51.40 with a February $55 Collar
  • $LYB  I am Long the February 80/85/90 Call Fly and Short the $72.5 Puts
  • $UPS  I own the February 06 weekly $103 Risk Reversal

50/50 Basket:

No positions

Earnings:

see Blog post from Friday afternoon 01/23

Submarine Basket:

see Blog post from Friday 01/23

 

Here is the Summary:

Positions_01242015

- DM 9:30 AM CST

 

Earnings Trades update

Now that Earnings season is in full swing, there will be increasing activity/focus on trades in this category. Here are the new trades this week that will survive to the weekend:

Netflix $NFLX  I own the January 23 weekly/June 345/395 Diagonal Call Calendar. I will take stock at $345 at expiry this week. I will adjust the Short June $395 Calls at some point soon

SanDisk $SNDK  I am Short the March $80 Straddle (1/2 size each) and Long stock at $78 (full size, hedge on 1/2)

Illumina $ILMN  I own the January 30 weekly 195/180 Risk Reversal (this is an early Earnings trade, reports next week)

Lands End $LE  I am Short the February 35 Puts (left over from the post-Earnings trade, the Long CS has been closed)

Existing:

Schlumberger $SLB  I remain Long stock at 77.053 & Short the February 06 weekly 82.5 Calls

 

- DM 3:00 PM CST

 

Long-term account update

No new positions this week. Material changes to existing:

Avago Tech $AVGO  No changes

Electronic Arts $EA  I adjusted the March Options to the Short June $50 Calls on 01/22

iShares Micro-cap $IWC  I recorded the .289 dividend that was paid on 12/24

Precision Castparts $PCP  No changes

ResMed $RMD  I switched from a Long Stock trade to a Long April 60/65/55 Risk Reversal Call Spread on 01/20

Walgreens $WBA  No changes

 

- DM 1:50 PM CST