Walt Disney is on a wild Roller Coaster

DIS_D

The 200 SMA is Rising from below and we should see price test it very soon. The RSI is under 30 but there still hasn’t been any convincing floor put in the stock yet in my opinion. The MACD remains in a free-fall.

This breakout back-test looks to have a target of $102.50 so one could consider buying a Put Ratio. Why? For these reasons:

  • capture any additional short-term weakness
  • If the “meat” of the Put Ratio gets ITM then you still have the lower short Puts that you can manage (you will get a bounce eventually so getting Put stock at that strike is just fine)
  • lower cost than just buying Puts outright (depending on structure, can get a credit)

An example structure:   long the August 28 weekly 105/102 Put Ratio. Cost is under $.30 and can make $3 if at $102 on expiration.

– DM 9:40 AM CST

Gourmet Burgers

I have an Earnings trade for $RRGB (reports BMO 8/11) and here are the details:

  • Long the August 90/95/100 1×2 Split Call Ratio
  • Short the August $75 Puts
  • Cost:  tiny credit
  • Takes margin

My Risk starts at $100 on the topside and $75 below. Quite a range to work with. This trade has a sweet spot of $95 at expiry.

RRGB

EPS graph courtesy of Estimize (I added the Red lines)

– DM 11:10 PM CST

 

Earnings reaction in Walt Disney

Let’s look at a Daily chart first:

DIS_C

A Doji for $DIS has formed under the Rising 50 SMA but above the Breakout back-test level (defined by the horizontal Black line).

Now for some perspective – a Weekly chart:

DIS_weekly

Up trend remains in tact so likely an opportunistic Buy entry here for traders who have been waiting on a pullback.

 

Disclosure: I traded the stock in after hours on 8/4 but have switched to an August 28w 111/116/110 Risk Reversal Call Spread today for a post-Earnings trade.

– DM 9:10 AM CST

The Collar Put Ratio starring Facebook

One of the Option strategies I utilize for protecting a position short-term is the Collar Put Ratio (CPR). Here is what a CPR looks like using the Fab 5 position ($100 Roll) for $FB as an example:

I am long stock at $90.33 (since 7/16)

Here is the CPR:

I am short the August 07 weekly $95 Calls
I am long the August 07 weekly 95/87.5 1×2 Put Ratio (for every 1 contract that I am long the $95 Put I am short 2 $87.5 Puts). This takes margin

So let’s look at a Daily chart to see how this trade looks post-Earnings:

FB_G

The black horizontal line represents the $95 level which is key for the Option portion of my trade. The long $95 Puts are ITM (in the money) so the long stock is protected well so far.

– DM 9:30 AM CST

Extending credit in American Express

I have a position in $AXP for the Submarine Basket. Here is how the position looked coming into today:

I am short the July 24w $81 Calls
I have an Options Net of $1.52
There is no stock at this time

Today I have chosen to add the following Option pieces to create a 78/79.5/81 Call Fly:

Long the July 24w $78 Calls
Short the July 24w $79.5 Calls (2x)
Switch from short to long the July 24w $81 Calls

This adjustment was done for a $.11 credit so the Options Net improves to $1.63 and frees up some margin use.

– DM 9:30 AM CST

 

Risk Reversal Call Spread (RRCS)

I often receive inquiries on what a RRCS is so I thought I would use a current position in $PCLN to illustrate what it is. The acronym of RRCS stands for:

Risk Reversal Call Spread

The typical structure for this trade:

  • Long a Call Spread
  • Short Puts

Here is what I have for $PCLN in the submarine basket:

PCLN_F_2

– DM 1:00 PM CST

Looting a Call Fly

For those that are not familiar with a Call Fly, here is how it is structured:

  • Long a Call. This is the bottom of the Call Fly
  • Short 2 Calls at a strike (or more above). This is middle of the Call Fly
  • Long a Call above the short Calls. This is the top of the Call Fly

This trade structure will be for a debit (I often sell Puts below to pay for it).

So what does it mean to loot a Call Fly? This is really a made-up term from me but this is what I am referring to:

You have a Call Fly and the stock moves up enough to where the bottom of Call Fly is ITM (in the money). However, it doesn’t have enough momentum to get near the middle of the Call Fly. What I often do now is StC (Sell to Close) the long Calls (bottom of the Call Fly) thus leaving the rest of the Call Fly (middle, top). You want the remaining pieces to all expire worthless. By doing this though I increase the Risk (I would be short 2x Calls in this situation) so I always set a Buy Stop near the middle Call(s) strike (would act as a hedge).

Here is a recent trade where I did just that:

Lennar $LEN

I initially opened a long July 50/52.5/55 Call Fly with short $47 Puts on 6/23 for Earnings. The stock did move up near the $52 level but stalled and pulled back. I StC the $50 Calls thus leaving the rest of the trade. I then set a Buy Stop at $51.25 on 6/25 (which has triggered).

 

– DM 9:40 AM CST

 

Earnings preview for Adobe and FedEx

Weekly charts

ADBE_B

I like the June 80/82.5/85/75 Risk Reversal Call Fly for an ADBE earnings trade (long the 80/82.5/85 Call Fly and short the $75 puts).

FDX_weekly

I have an existing position in FDX but for an earnings trade consider this:

Long the June 182.5/185 Call Spread
Short the June 177.5 Puts
Cost: $.20 credit
Takes margin

– DM 10:40 AM CST