All our July positions are cruising into expiration with room to spare and should expire profitable. The rebound in the major indexes has not translated into a rebound in each of the individual stocks.
Today's market decline appeared to be normal profit taking after four days of gains. The Yellen testimony unsettled the markets a little but they began to heal going into the close. The Greek parliament voted to accept the harshest austerity measures ever demanded by the Troika and that sets up final negotiations this weekend for loans and recapitalization of the banks. The markets should breathe a sigh of relief that this chapter of the long running Greek tragedy is almost over.
With Greece, Iran and Yellen out of the way the market should focus on earnings in the weeks ahead. The uncertainty that has clouded the markets for weeks will begin to fade.
However, the chances for a September rate hike are growing despite the weak economics. This means that a couple weeks from now the rate hike cloud could thicken and the volatility return.
Fortunately, our remaining July positions should all expire worthless. August positions are very difficult to find since 85% of companies report earnings before the August option expiration.
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Items shaded in blue were previously closed.
Current Position Changes
Stop Loss Updates
Check the graphic above for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.
XOP - Oil Exploration ETF (Stopped)
We had a bear call spread on the XOP but the $2 spike after the Iranian deal was announced knocked us out of the short side. I had recently lowered the stop loss to make sure we did not give back our profits and we still exited with a 42-cent gain on the short side. The long side is going to expire worthless on Friday unless somebody nukes a Saudi Arabian oil field.
Closed July $47 call, entry $.48, exit .06, +.42 gain.
Expiring July $49 long call, entry .13, currently .00, -.13 loss
Net gain 29 cents.
TIF - Tiffany (Stopped)
We were cursed on the Tiffany play from the start. The very next day TIF was upgraded in glowing words by a major analyst. Before the week was out three more firms upgraded the company and the stock has rebounded $4 in a week.
We were stopped out the same day we opened the short position with a gap open on Thursday. Fortunately we did not lose much and the long call is still rising. This is an August position so we still have five weeks to go on the long side. If TIF breaks out of the resistance at $95 we could see that call rise sharply. Let's keep our fingers crossed.
Stopped Aug $95 Short call, entry $1.36, exit $1.55, -.19 loss
Retain Aug $100 Long call, entry .49, currently .34.
XOP - Oil Exploration ETF (Bear Call Spread)
Now that the Iranian deal is old news the lack of Iranian oil hitting the market is already priced in. The soonest Iran could see the sanctions lifted is December 15th and that is unlikely. However, the negativity in the energy sector is still growing. Today the EIA reported a -4.3 million barrel drop in oil inventories and U.S. production fell -37,000 bpd last week and oil prices still declined nearly -$2. Oil prices are likely to continue declining for the next several months.
Energy equities are going to report a -62% decline in earnings according to S&P-IQ. While some will probably beat the overly bearish estimates it may not be enough to rescue the sector.
Sell short Aug $46 call, currently .79, stop loss $45.45
Buy long Aug $49 call, currently .24, no stop
Net credit 55 cents.
YUM - YUM Brands (Bear Call Spread)
YUM reported earnings on Tuesday after the close and disappointed the market. Shares declined -$2.70 today and could easily retrace to the low from the prior week at $85. Now that the earnings anticipation is over we should not see any rebound in the next several weeks. Investors will be focusing on the stocks still to report.
I am buying a higher strike than normal because the short strike is already a new high and we will stop out well below that $95 level.
Sell short Aug $95 call, currently .89, stop loss $92.25
Buy long Aug $105 call, currently .17, no stop.
Net credit 72 cents.
Existing Play Recommendations
Links to original play recommendation
GMCR - Green Mountain Coffee (Bear Call Spread)
Z - Zillow (Bear Call Spread)
NSC - Norfolk Southern (Bear Call Spread)
APC - Anadarko Petroleum (Bear Call Spread)
HP - Helmerich & Payne (Bear Call Spread)
SNDK - SanDisk (Bear Call Spread)
XOP - Oil Exploration ETF (Bear Call Spread)
TIF - Tiffany (Bear Call Spread)
LULU - LuluLemon Athletica (Bear Call Spread)
Prices Quoted in Newsletter
At Option Investor we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.
The prices quoted in the newsletter are the end of day prices in most cases.
When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.
For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time the readers are able to get a better fill than the opening print because of market maker bias at the open.
For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.
All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.