Yesterday the bears definitely had the upper hand in the morning only to see the selling subside and the often seen grind up continued through the afternoon. Much of the excitement was in the afternoon surrounded by none other than news concerning Apple (AAPL). Overall a fun day that is still seeing individual stocks set-up and break out.
I personally am still light in the portfolio. I posted previously about my Amazon (AMZN) and did get filled and exited that position Wednesday as I put a note out on the stream. I exited as I did not like how AMZN cut through 265 on volume so I was looking to take advantage of any up swing by placing an order at the mid-price to which I got filled. Below is my post to the stream and orders:
As I was already out of the position, yesterday saw a move down to 255 and did put this position underwater about -$250.oo give or take but price action brought it back up to slightly positive . Either way I was out so moving on. I did try to put on another similar position for a 15c credit capturing the 245-255 range but never got filled as my entry marked near a bottom in the price action.
I remain in the AAPL position as shown in this post. I haven’t played AAPL in a while and if interested into why I got in it is stated in the linked post. It is a March 460-480-490 Call Broken Wing Butterfly for a debit of 4.25. Yesterdays news definitely helped this position.
Then I put on a short position. Yes I feel like one of these move to the downside is going to stick shaking some further weak bulls. Yesterday I put on a short position via options in Visa (V). It came out with earnings Feb 6th AMC and beat on EPS and revenues. The action in Visa yesterday had me believing a pause or slight pullback is due after a very consistent run as of June 2012. I am looking for a pullback to the 50sma (blue line) which coincides with a gap support area around 154-155. Visa has pretty much been in a basing pattern since the new year gap and I am looking for a pullback to at least the bottom of this base. Also the Relative Strength Average (purple line in blue highlighted box) is beginning to roll over, something we have not since but only once during this recent run.
With this information I entered into a Mar/Feb 155/150 Put Diagonal spread for a 2.50 debit. This position will provide a return of approximately 30% if 155 is hit and will provide near a max return if the gap is filled, all being around next week Friday expiration. I wasn’t too concerned about the greeks when putting this on as I am looking more for direction. But I also wanted to take the greeks in consideration and wanted to take advantage of any increase in IV so the Diagonal gave me what I wanted:
- Delta – than a Calendar spread while creaqting profit from downside move
- Theta – no big time decay (becomes theta positive w/downside move) as seen with a single call position
- Vega – wanted positive vega so that an increase in volatility will benefit the position
Below is a risk profile of the current trade: