SPY flirted with $300 all day, finally breaking through in the last ten minutes.
My account largely traded flat all day, starting the day down $10, then up $20, then down $15, finishing the day down $0.77. Today’s end of day account value is sitting at $1,868.
Today’s Positions
- Canopy Growth Corp. (CGC): 40 shares @ $27.40 (-0.11%)
- YETI Holdings, Inc. (YETI): 10 shares @ $30.30 (0.53%)
- Microsoft Corp. (MSFT): 1 share @ $136.12 (0.03%)
The biggest thing to note today is that with today’s gain of $1.60, my shares of Yeti finally broke even. We’re up $0.72!
The REAL big note, however, is not in the positions I have open, but in the stocks I’ve been watching (and in the new position I opened in my paper trade account).
Tailored Brands
I’ve been watching Tailored Brands since hearing about it in an interview with Michael Burry on September 3rd. TLRD posted Q2 earnings after hours today and saw their stock price absolutely tank! It fell off a cliff, bouncing off a bottom over 30% below their regular hours closing price. That drop took only 10 minutes. Ouch!
What’s funny, is that I saw TLRD had super high implied volatility when I was poking around in my paper trade account in ThinkorSwim.
The chart at the bottom shows their IV Rank is over 95%. And that is one of the big indicators that OptionAlpha looks for to find overpriced options.
With the rest of TLRD’s technical indicators appearing near the “sell” range, I thought, why not open up a call credit spread? So that’s exactly what I did.
If you aren’t familiar, this is a bear position in which I am a selling a call option with strike price (of $8) that is closer to the current stock price (which is around $7), and buying a call option (at $9) that is further from the current stock price. Both options have the same expiration date (October 18th), creating the vertical call spread. This is also known as a call credit spread, since you are receiving a credit for opening the position, instead of paying to open the position.
I’m betting that the stock is either going to remain flat or fall over the next month. The max risk is right in my target range ($80 is 4% of my $2,000 paper trading account).
When I opened the position, TLRD was trading right around $7. When it finished the day at $7.17, I was a little bit negative on the trade. But as I said before, 10 minutes after market close Tailored Brands posted Q2 earnings and the stock tanked to $4.97. It bounced back up and is currently sitting between $5.00 and $5.50.
I’m still not sure I understand exactly how these vertical spreads work, but I believe my initial profit is $18 when I opened the position ($20 credit for the vertical spread minus $2 in fees). In looking at my profit and loss for the day on this trade, it looks like it is sitting around $10 profit.
What I’m not sure about, is if this is in addition to the $18 credit I received for opening the trade. Or, if the P/L Open of $10 is indicating that the trade is currently sitting at $10 profit of the $18 max potential profit. I’ll have to do some more research and figure that out. Fun times!
And feel free to chime in if you know the answer(s), or if I’ve misstated anything above. Always appreciate the opportunity to learn!
FNMNY 