Rearranging the $DECK chairs

All hands on $DECK

$DECK the halls

Ok, I will stop there. Deckers Outdoor ($DECK) has been under tremendous selling pressure due to some analysts’ concerns with UGG sales. I am currently short the stock (from the break at $40) and have sold the October 35 Put at 1.90 (on 9/25/2012). Let me break this down:

  • This trade creates a Covered Put trade
  • The gain is capped on a move down thru the $35 strike, capped at $33.10 ($35 – $1.90)
  • What this also does is help offset any Relief Rally in price, to $36.90 ($35 + $1.90)
  • This creates a range between 33.10 & 36.90 wherein price can bounce around – without the need to address the position
  • This short Put does not take margin as I am short the stock

Some traders have posted some fundamental data that will surely be of interest to those that are looking for cheap stocks from a valuation perspective. So far, the market is in a battle here – just above this $35 level – to see if that is the floor for price.

 

Graphic courtesy of Wikipedia

Collared

I have written about using an Option Collar on several occasions here and here – and thought I would provide some additional thoughts on the Collar trades that I have on in January.

I currently have the following long positions on with an options Collar:

1) CREE with a FEB 26/28 collar in the swing account

2) DECK with a FEB 80/85 collar in the swing account

3) SBUX with a FEB 45/50 collar in the long term account

The positions for #1 & #2 where dip buys that bounced nicely and I really wanted to hold the positions for a swing timeframe – with a collar I am able to do that more easily.

With the long-term position in SBUX, I wanted to hold through earnings and didn’t mind the cap at the 50 strike – but certainly wanted the downside protection if any issue arose from the earnings release.

Updated Section

CREE is currently trading at 25.36 but the collar trades at 1.45/.25 for the 26/28 put/call for February 18 expiration which would leave a net of 1.20 if executed right now. Just a follow up to what has transpired since putting on the collar last week.