Trade Alert: Quick Trade Ahead of the Holidays
Christmas is just about here, so I wanted to wish you and your loved ones a wonderful holiday. I’m spending some quiet time with my family and friends in Baton Rouge this Christmas.
But before all of us get absorbed in the holidays, I have a quick alert for those who still have half of their Vail Resorts put options. As I mentioned last week, I’m still monitoring this trade, even though we’re officially out of this position in the portfolio.
Vail Resorts’ shares moved higher this morning, possibly because investors are reacting to new storms rolling off the Pacific toward the Rockies. Whatever the reason, if you still own puts on Vail, I want you to put in a protective stop-loss order to maintain a small profit on the second half of your position.
Action to take: Set a Good ‘Til Canceled sell to close order on Vail Resorts (NYSE: MTN) January 2016 $130 put option (MTN160115P00130000) at a stop-loss of $2.75, or a price that secures you at least a 25% return. At last glance, it was trading at $3.10. Keep this order open until it’s filled.
By adding this protective stop-loss order, we are protecting a portion of our profits on the second half of this trade, while allowing the put options to rise in value if shares retreat as they usually do during this period.
I’ve also received some emails from those of you who still have open orders, since Vail’s price originally moved too fast for some people to get in. If you still have an open order, you should cancel it. If you left your orders open and those were filled this morning, go ahead and close your entire position. You’ll exit with a slight gain. Going forward, any open orders should be closed when we get out of a position.
We’ve completed our trading in Vail for 2015. I realize that some people were not able to get into the Vail trade before the options moved. That has been a challenge a few times in recent months, largely a function of timing. Because this is a seasonal-trading service, we’re buying puts and calls at the exact moment my charts tell us to get in. That means we’re moving into a position right as the shares should be moving in our favor. The fact that the options move away from our price quickly is an indication of the trend at play.
Certainly, that’s not always the case. Polaris Industries (NYSE: PII) is a great example. The trend should play a particular way, but news from Polaris altered the trend in the short term and the shares didn’t move in our favor as other positions did. I will try to get us into positions a little earlier going forward, so that you have time to build your exposure before the shares move. But as with weather forecasting itself, there is a large degree of art to this — and I do not want us to move too quickly into a position since options are priced in part on the “time value.” The more time until expiration, the pricier the position, which limits our potential return.
Well, that’s it for this week. We’ve had a busy trading month, so I think we can use this time to take a breather, and kick back and relax for the holidays. I’ll be back with your regular Precision Profits weekly issue next Thursday — in fact, we may have a trade to initiate next week.
Of course, if anything significant comes up before then regarding our holdings, I’ll send you an alert straightaway.
In the meantime, you can click here to see how our positions currently stand.
I hope you have a merry Christmas.
Until next time, good trading…
Editor, Precision Profits