Review of Salesforce.com as it heads into Earnings

I have an existing position in $CRM where I have done a few tweaks today. Here is the trade coming into this morning:

I own the July 75/82.5/67.5 RRCS (Risk Reversal Call Spread)

This morning I added a short stock piece on the break of $73. I have since covered this for a $3.16 gain. I have also added long May 22w $67.5 Puts for a -$.90 debit (protects the short July Puts). The Options Net is now: -$1.50

So in summary, the trade looks like this into Earnings:

  • Long the July 75/82.5 Call Spread
  • Short the July/May 22w $67.5 Put Calendar

 

– DM 2:30 PM CST

 

 

One way I manage Risk in an Options trade: using Stock

It is no secret that Options are only available for trading during normal market hours. With that in mind, it is also no secret that you can trade stock outside of normal market hours if available for trading by market makers (most are).

I often construct Option trades that have a bias – like most traders – but I leave in flexibility for when the market has other ideas (which is frequently). To illustrate I will use the current $CRM trade as example of what I mean. Here are the specifics:

08212014

I posted the above worksheet yesterday via Twitter to show the tickers I was reviewing for Earnings, some relevant Option info, and the trades that I did:

CRM_B_2

For $CRM:

  • I am long the August 22 weekly 56/58 1×2 Call Ratio
  • I am short the August 22 weekly 51 Puts

With every trade that I use Options there is one potential step that can become very important to the success of the trade: hedging with stock. With this trade, any move by price beyond $58 would start to eat into the profit of the Call Ratio.

Here are my thoughts on $CRM:

CRM_B

Price right now is: $60.20

 

 

Volume Bar count Buy in Salesforce

Just a quick post on one of the simple approaches that I use in entry: the Volume Bar count Buy/Sell signal. I have been watching the pullback in $CRM today and noticed there were several 5 RED volume bars in a row that would have offered a Buy signal. Here is the 60 minute chart:

CRM_60mThe 1st entry would have been a brief trade, likely a stop under my normal trading process. The 2nd entry would have been a nice gain to the Wed top. At the moment it is working on the 6th RED volume bar in a row, with a Trend Line as a potential bounce point as well.

As with all these, your money, your trade so incorporate it into your trading process if it appeals to you.

Trade adjustment, going to a Half & Half (from my Playbook)

I have done a little adjusting to my current long position in $CRM today. The 1st adjustment was to buy back the short December weekly 165 Call and move it out and up to the 170 monthly Call for December. I finished this adjustment earlier today, taking out $.90 cents.

Now that price has stabilized today, I have elected to do the following adjustment to a Half & Half:

  1. sold 1/2 the long stock position at 167 (gain of $7 from entry)
  2. BtO a 1/2 position in the December 165 Call for $4.40

Now this is what the trade looks like:

  • 1/2 position long stock
  • 1/2 position of a December 165/170 Call Spread
  • 1/2 position of a December 170 Covered Call (tied to 1/2 position long stock listed above)
  • long the December weekly 160 Put

Whew.