Trading Diary July 23rd

Hereisaquickrecapofallofthetradesthatwe?

initiated,closedorexpiredintheweekthatwasJuly23rdtoJuly27th?

MondayJuly23rd:

TRADE:LEN($31。

05)BoughttheAugust29/24PutSpreadfor0。

60

Enis?

Thecomebackofthehousingmarkethasbeenapersistentthemethroughoutthefirsthalfoftheyear,ashomebuildershaveregisteredtheirstrongestfirsthalfequitygainssincethecollapseoftheU。

S。

housingmarket?

Theirdomestictilthasalsoofferedcomforttoinvestorsconcernedaboutinternationaleconomicweakness?

However,withmanysignsthatgrowthconcernsaremovingtoU。

S。

shores,IdbeenwaitingforagoodentryforacontrarianplayonLENsincelateJune?

Withtheseasonalpeakofhousingseasonpastus,housingdatahasstartedtotaperoff,andtheoptimismpricedintohousingstocksseemsprimedfordisappointment?

Mymainconcerninmanagingthispositionistimedecayatthispoint?

IwilllikelyeitherexitthepositionorrolltoSeptemberonthenextdecline?

Readpost?

here。

TuesdayJuly24th:

Action:GME($15。

60)SoldtoOpenOctober13putsat。

43

NewStructure:

LongGMEOct17/13Putspreadfor1。

00

CC:ThethesishereisthatGamestopisinabusiness(brickandmortarvideogamesalesandrentals)thatwontexistinafewyearssoIthinkthestockhaswaymoredownside。

Theissuewithallofthesetypesoftradesistiming。

Thereforethesaleoflowerputispremiumprotectionagainstthestockstabilizingorhavingadeadcatbounceafteritsrecentmarchlower(readtradeupdate?

here)。

Action:ORLY($88。

40)SoldtoopenAugust85putsat2。

60

NewStructure:

LongORLYAugust90/85putspreadfor0。

50

Enis?

SinceIfirstinitiatedtheORLYAug90puts,theimpliedvolatilitymadeadramaticmovehigheraheadoftheearningsreportonJuly25th?

Asaresult,Iwantedtosellsomepremiumtomonetizethatmovehigherinvolatility,asIdidnotexpectearningstobeasignificantevent?

Indeed,thevolatilitycrushafterearningswasquitedramatic?

Outrightputsactuallylostmoneyevenasthestockinitiallyopenedlower?

ORLYwasundersellingpressureonbothThursdayandFridayafterearnings,andIheldtheputspreadgivenmylowcostof$0。

50atthispoint?

IexpectORLYtomovebelow$85ifthebroadermarketshowsanyresumptionofweakness?

Readpost?

here。

TRADE?

AAPL?

($601)BoughttheAug540/5201×2PutSpreadfora。

55Credit

Dan:AftertakingalonghardlookatAAPLheadingintoitsfiscalQ3,toexpressabearishview,Iboughta12PutSpread,atradestructurethatwehaveusedsparinglyonthesitelargelybecausewedontusuallythinkitisappropriateforretailtosellnakedputs?

AAPLisalittledifferentthoughthanmostotherstocks,andasthestocksreactiontotheirearningsmissandQ4guidedownshows,investorsuseeverysell-offasanopportunitytobuymore?

This5-10%discountbidforthetimebeingputsafloorinthestockandwhendownsideputsbecomeexpensiveratiospreadslookattractive?

IspecificallychosestrikesofmyAug540/52012PutSpread(readhere)?

thatwouldresultinacreditsothatifthestockhadamutednegativereaction,didnothingorwentupIwouldmakemoneyandmymaxriskonAugExpirationisthatIwouldgetPutthestockdown16。

8%at$500,whileIstillhadtheopportunitytomakeupto20。

60btwn540。

60and499。

40。

WiththestockretakingsomelostgroundsincetheWednesdaylows,thepostionisadecentholdatathispointasitseemsveryunlikelythatIcanlosemoneyonthetradeinthenext3weeks。

EnisalsointroducedsomeriskmitigationstrategiesforAAPLlongsorthoselookingtodefineriskintothepotentiallyvolatileevent(here)

WednesdayJuly25th:

TRADE?

AAPL?

($574)BoughttheAug555/535putspreadfor$4。

25

Enis?

PerhapsIshouldhaveknownbetterthantotryandbuyaputspreadonAAPL?

ThemainimpetusformydecisionwastheideathattheearningsmissmightfinallybeacatalystforlargeinstitutionalinvestorstomovefundsoutofAAPL(anexceptionalwinnersofarthisyear)andintothebroadermarket?

Whilethatcertainlyseemedtobethecaseinthesecondhalfoftheweek(AAPLdidunderperformthebroadermarketsignificantly),themarketsoverallstrengthtookAAPLhigherwithit?

Iviewthisweekscentralbankreleasestobeclassiccasesofbuytherumor,sellthenews?

ParticularlysinceIdontexpecttheFedtoannounceQE3justyet?

IfImcorrect,thenweshouldseethemarkettomovelowerbyThursdayorFriday?

AndAAPLshouldbealeaderonthedownside?

IfImwrong,IwillprobablytakeAAPLoffforalossbyFriday?

Readpost?

here。

Action:MSFT($29。

00)SoldtoclosetheAug30putsat$1。

39,fora$0。

69gain

Enis?

Thiswasacaseoftakingoffaquickwinneraftertheearningsmove?

Ithinklong-termbusinesstrendsarestilltiltedagainstMSFT,butthestockmadeaquick5%lowerafterearnings,whereitmadesensetotakeprofitsonthetrade?

MSFTisonmyradarforfuturestrengththough(andconversely,IhavestartedtowatchGOOGasastocktouseforbullishtradesinthefuture,duetoitsinroadsinbothsoftwareandhardwareincompetitionwithAAPLandMSFT),whereImightlooktoreinitiatealongputorputspreadposition?

ItshouldbeespeciallyinterestingtowatchintothereleaseofWindows8?

Readpost?

here。

ThursdayJuly26th:

TRADE:GS($97。

40)?

BoughttheSept90/80/70PutFlyfor。

90

Dan:WiththeSPXupalmost1。

5%outofthegateThursdaymorningoncommentsfromECBheadDraghiabouttheircontinued?

commitment?

tofixingtheEuroZonesovereigndebt/bankingcrisis,IwantedtoaddtomybearishU。

S。

bankexposure?

Lateweekstrengthinequitieswasinmyopinionahead-fakefortherestestoftheJunelowsthatwearelikelytoseeinthenext2monthsonceinvestorsfinallygetthepointthatglobalgrowthhasstalledandatthisstageofthestimulusgametheirisverylittleintheneartermthatcentralbankerscandotostimulategrowthasopposedtogooseupequitymarkets?

GSappearstobeagreatshorthavinglittletodowiththeirexposuretoEurope,butmoresotoexternalfactorshinderingtheirabilitytogrowsalesandearningsinthefashiontheyhavebeenaccustomedtointhepast。

Readpost?

here。

TRADE:AMZN?

($218)BoughttheJuly27thweekly/August195PutCalendarfor$1。

30

Enis?

AsImentionedinthepost,Ilikedtherisk/rewardofferedbythecalendaronAMZNbecausetheJuly27thweeklyoptionswerequiterichrelativetotherestofthetermstructure?

Igotthedirectiondramaticallywrong,thoughthetradestillhas3weekstoexpiry,andtheAugust195putsareworthabout$0。

50asofFridaysclose?

Iwilllooktosalvagesomepremiuminthenextcoupleweeks,asitlooksquiteunlikelythatAMZNwillclosebelow195byAugustexpiry?

Ithinkthestructurehadalotgoingforit,butthereactionofAMZNinvestorstotheearningsreleaseamazedmeonceagain?

Thefaithremainsstrong,andthistradeislikelyaloserasaresult?

Readpost?

here。

Action:SBUX($51。

94)SoldtocloseAug50/45PutSpreadfor。

97。

12profit。

Dan?

Closingthisputspreadwasmyworsttrading?

decision?

oftheweek?

AlmostamonthagoIenteredanAug50/45putspread(here)asanextensionofmythesisthatslowingglobalgrowthwaslikelytoimpactU。

S。

multinationalswhorelyagooddealforfuturegrowthfrommarketssuchasChina,BrazilandEurope?

AfterNKEsdisappointingresultsinlateJune,IthoughthighvaluationconsumerdiscretionarypeerSBUXwasaprimeshortcandidate?

Aftersittingwiththispositionforamonth(andthestockonlydownabout2%fromwhereI?

initiated?

it),justhoursbeforetheirearningsreportThursday,IdecidedtoclosethepositionforasmallgainandavoidtheriskoftheresultsnotbeingasbadasIexpectedandhavingthepositionrenderednearworthlessovernight?

Muchofthis?

decisionwasbasedonpureemotion,Ihaveplentyofbearishbetsonatthemoment,andwiththemarketrippingonThursdayandmostifnotallgoingagainstme,andlookingatWFMup11%aftertheirbeatandraise,Ifeltitprudenttocutmypotentiallosses?

Riskmanagementgotthebetterofmeonadaywhenmytradingbookwasturnedupsidedown?

Igotlotsofemailfromreaderssomesupportive,andunderstandingofthe?

decision?

othersletsjustsaynotsomuch,butthereisaveryimportantlessonhere,whiletradinginthesevolatilemarketswehavetolookatourportfoliosfroma?

birds?

eyeviewandnotalwayspositionbyposition?

Thefactofthematteristhatmybearishbetshavebeenmakingmemoneyforacoupleweeks,IhadtrimmedmanyinthelastweekorsoandonThursdayafternoonwiththemarketwhereitwasoneindividualwinner,whichwasbasicallya?

coin-flip?

intoearningswasnotgoingtochangemuchformyportfolioonewayortheother。

WhileIwasclearlydisappointedwhenIwasnotlongthespreadFridaymorningwhenthestockwasdown11%,Iwouldhavebeenmuchmoredisappointedifthestockwasup10%andIhadnot?

considered?

closingitandavoidedwhatIfelthadthepotentialtobeabinarytrade。

FridayJuly27rd:

Action:FB($22。

95)SoldtocloseFBJulyweekly/Aug27PutCalendarat。

15fora。

25loss

Dan?

WhileSBUXwasmyworst?

decision?

oftheweek,notadjustingmystikesinmyFBPutCalendarwasthemostfrustrating?

Withthestockdownalmost8%ThursdayinreactiontoZNGAsdisastrousquarterandguidance,andtradingatthestrikeofthespread,Ijustfeltthatthecompanywasgoingtohavetosomeleverstopullintheirfirstquarterasa?

publicly?

traded?

company?

Wellthatobviouslywasntthecase,andwhileIenteredtheposition?

initially?

becauseIwantedtogametheAug16thlockupexpiration,Iendeduphavingsmallpremiumlosingtrade(here)becausethestockwayovershotthebandsinwhichthistradecouldbeprofitable?

BynotadjustingmystikesIwasessentiallyplayingforamuteddownsizemoveupordownandthatisobviouslynotwhatwegot?

IcouldrantonandonaboutFB,andtobeveryhonestIthinkthereisadecentshotthatyouseethisstockintheteensinthemonthstocome,theyhavelostalmostallcredibilityininvestorseyes,justtheinvestmentbankingunderwritersofthedealandthewallstreetanalystcommunityhave?

Ibelieveinthenear-termtheonlychanceforthisstocktogetbackto$3oisiftheyweretomakeabidforTwitter,an?

unfortunately?

pressreportsalreadyhaveAAPL?

hovering?

aroundthatlittlebird。

TRADE:GMCR($17。

90)BoughttheDec14/71×2putspreadfor$1。

30

Enis?

Thiswasaverysmall,speculativewaytoplayabustedstockintoearnings?

ImpliedvolatilityisexceptionallyhighintoearningssinceGMCRhasaveragedagreaterthan20%moveoverthepast8quarters?

IdidnotputmuchpremiumintothistradeasIdonthavehighconviction,butitsaninterestingstructuretoplayforaRIMMorNFLXtypeofscenario,ifthecompetitiondoesindeedeatGMCRslunch?

Therecentbreakdownofthestocktonewlowsaftermanymonthsofconsolidationhasstrengthenedthebearishcase?

Readpost?