How Are My Ideas Working Out? January Trade Review (Part 1)

I haven't done an accountability check lately. And before anyone accuses me of picking a strong month, I think it is important to note that fact, rather than ignore it. Large-caps and tech rose about 7% while small-caps were higher by around 10% this month. The results-bias of long trades SHOULD include plenty of winners. And despite the strong January, I can say I was far from perfect. Let's take a quick run through in two parts since this was a busy month. Note that all these numbers are based on Wednesday's close. Here's a look at the first bundle: 1/2 Alarm.com -- Ratio put spread for no net cost while the stock was trading at $52.51. Shares never threatened the long 1 January $50 put by short 2 January $47.50. Both expired worthless. No harm, no foul. 1/2 Netflix -- Wait until the stock breaks over $275 before considering a long. The shares were trading under $270 at the time. The stock gapped higher the same week and never looked back, now trading around $340. I'm not a fan of buying at these levels. I'd be locking profits or aggressively hedging against downside. 1/3 Cronos Group -- Buy February $12 calls at $1.40 while the stock was trading around $12. Calls are now trading at $6.40, up 350%. It's downright silly not to take profits here. Bulls of Cronos or the cannabis industry may want to consider a roll up and out strategy in which they would sell these calls then buy a higher strike with a later day expiration. 1/4 Zayo Group -- Buy 2 March $27.50 calls and sell 1 March $32.50 call for a cost of $280 while the stock was trading at $24.34. Shares are trading in the mid $26s after touching $29. The ratio call spread currently trades for $320, up 14%. Buyout rumors are still floating about. Earnings are due in a week, so continuing to hold is a high-risk, high-reward scenario. 1/7 (Yen) -- With Invesco CurrencyShares Japanese Yen Trust FXY trading at $87.95, the approach here was long the February $87-90 call spread for $120. This has wilted to $75, down 37.5%, done in by the rally in equities. I'd bail today as FXY is gapping up a small amount and should cut this loss a bit. 1/8 Johnson & Johnson -- Buy the Feb 15 $130 straddle for $8.00. This one has been painfully wrong as the stock has barely budged even after earnings. The straddle has been nearly cut in half. It's time to cut losses. 1/9 Funko -- Buy 100 shares with the stock at $15.83 and sell a February $17.50 call against those shares. The net cost was $15.11. Funko has rallied higher with the stock now trading at $17. The short call is asking $0.75, so the net is $16.25 against the $15.11 entry for a gain of 7.5%. 1/9 Plurasight -- Buy February 15 $25 calls for $3.15 when the stock was trading at $26. PS has flirted with $30 recently but pulled back a bit. With the calls at $4.00, that registers a 27% gain if sold here. Ring it. 1/10 Constellation Brands -- After getting knocked around post-earnings, I employed a somewhat aggressive risk-reversal approach here selling the April $140 puts to buy the February 15 $165 for a cost of $40. STZ has rallied to $170. With the calls trading at $6.70 and the puts at $1.10, this trade has rocketed from $40 to $560. While the gain is nice, it's important to note the short put required a large cash backing. From a cash supported return approach, this was a 3.7% gain. Still not bad annualized and could have been hedged for a greater ROR, but that wasn't my approach. At the very least, I'd close the position. One might consider using the profits to buy a small call spread out to March as the potential for additional upside exists. 1/10 Docusign -- You can't have a top pick for 2019 without a trade, so a few weeks ago I viewed this one as an attractive collar play that including buy 100 shares at $43.41, selling a Feb. 15 $47.50 call, and buying a Feb. 15, $40 put for $43.75 resulting in a risk of $375. With the stock trading at $49.37, the collar has nearly maxed out in value at $46.50. That's a gain of $275, or 73% for the trade. It's a good time to roll the collar out and up to lock some profits. 1/11 iQIYI -- IQ still looks like it wants to take off today. Back on Jan. 11, when shares were trading at $18.17, the trade approach was long a March 15 $17.50 -22.50 call spread for $1.80. As the shares are now pushing above $19, the call spread has edged higher to $2.08, a gain of 15.5%. Overall, I'm happy with these trade ideas, even in light of the strong market. Eight of the 11 trades were in the green with a few big winners. One trade broke even with two losers in there. Fortunately, there were no 100% losses or even a trade down more than 50%. Unfortunately, I didn't get as lucky in the second half of the group...

How Are My Ideas Working Out? January Trade Review (Part 1)

Eight of these 11 trade ideas are in the green, with a few big winners.

Columnist Conversation

Implied Volatility on Crude Exploding

Ulcer Index

The Market Doesn't Believe Musk

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.