December 11, 2015 at 10:38 am #4560
Stock is down 6% in about 20 days, that’s not crazy oversold but given the levels we are at it makes sense to slowly deploy capital into bull put spreads.
Here’s the trade:
Sell to Open DIS Feb 100/95 bull put spread @.80
ADD to the the trade at 1.20
ADD to the trade at 1.75
Attachments:You must be logged in to view attached files.December 21, 2015 at 11:07 am #4576
We are getting a little more selling here so it’s time to add to the trade
Sell to Open DIS 100/95 bull put spread @1.20
If filled, buy to close at .80
DIS will need to drop just a little more for this trade to get filled. Trying to be proactive here.January 4, 2016 at 10:37 am #4591
Filled 1.25January 7, 2016 at 11:21 am #4611
Time for our third add.
Sell to Open DIS Feb 100/95 put spread @1.85
Close this round at 1.20January 29, 2016 at 3:00 pm #4669
Time to roll this trade down and out in time.
Buy to close DIS Feb 100/95 Put Spread @2.95
Sell to open DIS Mar 95/90 Put Spread @1.68
This trade is in damage control mode now. The news about the ESPN subscribers has kept sellers pretty steady in the stock, which means there were no real sustainable bounces in which to scale out.
I think the spike to 90 earlier this month is a capitulative low… it’s possible we retest those levels with less momentum but I’m expecting a more sutainable bounce before that.
So the new trades will be in at about 1.70, with three full tranches. It doesn’t make sense to try and hold this all the way to March opex, but instead to scale out and scale back in if possible.
Here’s the followup execution strategy:
Buy to close 1/3 size @1.20
Buy to close 1/3 size @.80
Buy to close 1/3 size @.20
So if the stock bounces, you’ll get a fill pretty quickly back at 1.20… be ready to reenter at the original roll price or about .20 higher at 1.90. This is one where it is possible to scalp our way out of some of the current losses.February 9, 2016 at 1:07 pm #4696
This is the one trade that has not performed well… and that’s an understatement. It’s still manageable, but earnings are up on deck and I’m not comfortable having that much exposure on in the stock.
It’s time to put on a “sanity hedge.” This is a technique where I buy some puts that are one month further out in time. The reason I go further out in time is that the time decay doesn’t really matter and I still have the time decay in the original trade.
Here’s the trade:
Buy to open DIS Apr 85 Put @2.70 or lower
Sizing is crucial here.
Figure out your total net delta on your spreads, and buy enough puts to cut your delta by half or 2/3ds.
The delta of the option is -33, so if you have 300 delta then you can buy 5 puts to cut your size down. If you have only 100 delta then you can buy two to cut your directional exposure by 60%.
This is a “sanity” hedge, meaning we’re not going to stay in the trade for very long.
Here’s how we’ll execute on it.
IF DIS gaps down big, then we’ll close out the puts for a profit and use those profits to pay for the cost of the roll on the spreads.
If DIS gaps up big, then we’ll scale out of some of the put spreads with intent to re-add on a pullback. And if the stock pulls back after earnings, that’s when you close out the sanity hedge.
This trade may require one more roll out to April, but that roll won’t be needed for a little while longer.February 17, 2016 at 11:59 am #4719MikeParticipant
Hi Steve, can you give an update? Like what to do with the put?February 22, 2016 at 10:58 am #4726
Earnings seems to have marked the bottom. We’re going to start scaling out of our spreads with intent to scale back in if we get lower prices again.
Buy to close 1/3 size DIS March 95/90 Put @1.15
Will re-sell if the price comes into 1.50 again.February 24, 2016 at 12:43 pm #4744
Closing out the sanity hedge here on the dip:
Sell to close DIS Apr 85 Put @0.85 or higher.March 23, 2016 at 9:02 am #5103MikeParticipant
Steve, whats the deal on Disney? We have expired, and can’t seem to find an update?March 29, 2016 at 9:19 am #5157
Yes, the sold spreads expired worthless.
I’ll write up a more detailed followup shortly.
- You must be logged in to reply to this topic.