Down with Under Armour (UA) August 1, 2007
“Well. I followed my discretionary gut feeling and pounced on August put options this afternoon. I bought high this morning and lowered my cost basis this afternoon. Look for $1.15 to $1.50 in my trades. My target: $60 strike price.
Why? I am looking for the gap to fill after the earnings release. If the stock holds strong, I will roll them over to next month (if that’s the correct option terminology). The gap should fill; now I just need to nail the time frame and grab some profits. Maybe it won’t work but I tried.”
My Under Armour (UA) puts closed with a small profit but I played this position completely wrong. My cost basis was too high as the August 60 puts bottomed near $0.35 per contract. I jumped in too soon and didn’t allow the momentum to dry up before pouncing on the puts. They peaked above $5 yesterday around lunch but I doubt I would have had that maximum gain. The ideal trade would have been a cost basis down near $0.40 and a sell above $2.50 (this translates to a 500% gain).
“On another note, the AUG $140 puts for AAPL were trading at $2.55 last week and reached an intraday high of $13.40 today. It’s too bad I chickened out and never purchased them. I could have gotten out above $12 per contract for a 375% gain in one week. The Apple (AAPL) freaks scared me so I passed.”
Well, these Apple (AAPL) puts which expire tomorrow but end trading today are now above $22 per contract. The options peaked for an 800% gain yesterday (if I actually bought them). Following your gut can cost you. JUST TAKE THE TRADE CHRIS! Oh well, let’s move on.
Hi Chris,
can I get your technical breakdown of the UA trade? Im always interested in your reasoning for taking the trade and also the in depth things you saw for wanting to buy the Puts.
-Ty
Ty,
Sorry it took a few days to write back.
I owned UA in the past and became accustomed to the lousy performance ti gave after earnings (positive or negative). Therefore, I had the gut feeling that the gap-up would be short lived and would have to close. Mix that in with the unstable market over the past few weeks and it seemed to be a great discretionary trade.
I jumped in too soon and should have known to wait. The entire trade was based on past observations I made in the stock both as an owner and observer. UA has never broke out and run up like it should. I was right again but my timing was off.
Hope this helps.