GrubHub Option Swing Trade — May 12 Trade Log
After an almost neutral Monday trading session markets seemed somewhat indecisive. Bullish sentiments were predominant with the reopening of various economies throughout the United States and the world. The S&P Futures were trading positive on the premarket hours.
The markets were quick to reach their highs for the day and set off to what seemed to be a horizontal day of trading until midday when Dr. Anthony Fauci stated that the situation in the United States was not yet under control for states to be reopening their economies. After the conference call markets hurried to an aggressive sell off, in less than an hour the S&P 500 dropped more than 2% and the SPY reached its lows in the after market hours and dipped down to almost a 3% loss.
Our portfolio was mostly loaded in PUT contracts, we only have one CALL so we were kind of glad to see this negative downturn for the day, we saw some appreciations and in some positions we were starting to see the light at the end of the tunnel.
AMAT July 17 2020 $37.5 PUT & AMD July 17 2020 $40 PUT
After a long time of seeing both these stocks (AMAT & AMD) rise and having our contracts go further and further OTM (out of the money) we finally started to see the the light at the end of the tunnel, we are still holding both contracts so we do not want to rush and claim our victory just now but it did give us a more positive outlook on these trades.
These were not winning trades to start off; we bought them without any confirmation from the underlyings, neither the indicators of each stock nor the market gave any signal of a downward trend when we entered these positions so we are paying dues for not waiting the proper time to enter.
We are still on a really speculative side for this trade, but today’s close gave us some reassurement. AMD dipped more than 4% with the aftermarket trading hours and AMAT almost reached the same 4%, this yet doesn’t confirm a downward trend, it could even be considered a good entrance point and tomorrow morning Jerome Powell’s conference will probably set the mood for the days to come. Once again, it is a small amount that we have at stake on these positions so we won’t let the markets frighten us to a rash decision.
Ford December 18 2020 $5 CALL
Yesterday we saw this contract winning around 10% or better at its highest, Friday around 16% at its best and still we held it. Today the P&L finally reached the negative numbers after rebounding from the high point in the price channel. The limit we have in the amount of transactions we can place makes us take more stubborn decisions trying to capture great profits in all of our trades, with Ford, we know it is a safe bet, it can go lower than the current price but the FED is backing up the company and the contract has a lot of time to appreciate until expiration so we are playing it really patient with this contract.
An important observation: we would be generating a lot more from this contract if we traded it actively, even though we have a limit of transactions, we need to take this into account and make adjustments to our more long term trades, with an active management, we could be receiving higher yields rather than just having positions slowly appreciating.
NIO August 21 2020 $3.5 PUT
We placed our trade on NIO after spotting a clear price channel in which the stock was trading high. The stock is moving slowly but it is trending downwards, up to this point, following the price channel strategy was effective direction-wise but due to the stocks low price, the nominal change was minimal on today’s trading session and still is out of the money, we are still on the downside for this trade, we are currently losing $2 but we expect to see this appreciating soon as it approaches to being in the money.
The RSI is really low and the channel we drew is conveniently below the $3.50 level, we cannot determine exactly whether or not it will reach our target price but according to the chart and indicators we are close to reaching a selling point.
GRUB June 19 2020 $40 PUT
Around midday today we saw the news that GrubHub stocks were trading around 36% up because news spread that UBER Tech. was interested in acquiring the company. We did not make a lot of research before placing the order for this trade, but after such a violent rise in the price of the stock, we were willing to bet a small amount on the downside that it would correct and adjust at a decent trading price. We bought the contact at $0.70, we were under the water for a while with this one but as soon as the markets started selling off towards the end of the trading session we saw the contract appreciate, at a certain point the contract was appreciated up to 27%, as it was a completely speculative trade we let it run, as of now it is up by 14%.
Even though it was completely out of the plan, we were willing to risk for an opportunity like this, at the time, we saw it like easy money, and for the time being it has been but we still can’t guarantee anything, a simple news can change the course of the trade but due to the fact that it was only news with very little information and not many official backup we knew it had to correct the price even a little and in fact it did, still the RSI is really overbought so odds are favoring short positions but we do not know how low the price can go.
