Watching and Waiting
Cisco (CSCO) delivered the goods, but is seeing a somewhat expected sell-the-news reaction. I have gone ahead and cashed out on the downside hedge and the downside trade on the stock into earnings. The hedge worked out satisfactorily, but only because I had a bearish trade on CSCO into earnings. Obviously, the shares are lower and the hedge only picked up about $0.08 against the purchase price, so it was only a partial hedge, not a neutralization. I was able to close the downside trade, which was long 1x March $21 puts and short 2x February 20 puts, for $0.50 after buying it for $0.35. Therefore, the downside trade along with the hedge were able to protect my long shares. I still hold the worthless ratio call spread, but I didn't put any capital at risk for this position, so I will hold it in case CSCO recovers.
Whole Foods (WFM) on the other hand, did not deliver the goods. The stock is paying a price today – even beyond what I anticipated. I opted not to trade this one yesterday and that turned out to be the right call for me. At best, I would have skated out with a break-even trade, but the timing required for even that would have been near perfect. Based on WFM's past, I would wait two or three days before coming back to this one....243 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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