2nd Trade Update CSCO Reviewing A Loser Into the Print

2nd Trade Update CSCO Reviewing A Loser Into the Print

2ndTradeUpdateAug15th,2012at3:23pm?

Okasmanyofyouwhohavebeenfollowingmypostsonthistrade,IclearlyFdthethingupfromthegetgo,mytimingwasworsethanpoor?

even-though?

Isuggesteditwasnotahighconvictiontrade,butIthencompoundedtheproblembyaddingtotheSeptPutSpreadbybuyingahigherstrikePutwhenthestockralliedadollarinmyfaceinjustaweek。

AtthetimeIalsomentionedthataddingtotheloserwasundisciplined。

SO?

atthispointifIweretoadjustagain,manyofyouwouldwanttositmedownandhavealittleintervention,butdontworry,wewillsavethatforanotherday。

IfIwerelookingatthestocknowlessthananhourbeforetheprintwithafreshsetofeyes,my?

general?

skepticalnaturewouldsuggestthatthe17%rallyinthesharesinthelast3weekstakeswhatatonetimewasaverylowbarforthequarterandraisesitdramatically?

BUTthestockisnotgoingtotradeonthequarterjustended,thecompanyhadalreadyloweredguidance,sotheyarelikelytomeetorbear,itwillobviouslytradeonFiscalQ1and2013guidance?

AfterreadingthroughmanyoftheStreetspreviewsandreviewingsome?

competitors?

recentlyannouncedresultsIthinkitissafetosaythatnowayisexpectinga?

meaningfulbumptoguidance,sothenetofitisthatthebarisstillfairlylow。

LIKELYSCENARIOS:

Bearish:

1。

IFthecompanylowersguidancebelowconsensusIseethestockdownbelow16,whichwouldbeslightlyabovetheimpliedmove。

2。

Ifthecompanymisses,guidesdown,andseemsdownrightperplexedbythemacro?

environment?

andresultsspeaktomarketsharelosses,Ithinkthestocktradesrightbacktothe15levelwhereitwastradinginlateJuly。

Bullish:

1。

CompanybearsQ4,raisesQ1and2013andthestockFillsintheentireGapfromtheQ3missandtradesabove19。

2。

Companyreportsin-lineqtr,guidanceisbasicallyin-linewithguidanceandconsensusandthestocktradesbtwn17and18consolidatingrecentgains。

SOWHATTONOWWITHMYLOSINGPOSITION?

RATHERTHAN?

FURTHER?

COMPOUNDINGALOSER,AGAIN,IAMGONNASTICKWITHWHATIHAVE,IAMRISKINGWHATIAMWILLINGTOLOSE。

BUT?

IfIwaslookingatthiswithanentirelyfreshsetofeyes,Iwouldprobablybeprettytemptedtobuythemove,whichnowsitsatabout6。

5%,ithastickeddownabitinthelast24hours。

Thiswouldprobablybethewaytodoitplayingforan?

outsized?

move:



CSCO($17。

50)BuyAug17/18Stranglefor。

55

-Bought1Aug17Putfor。

27

-Bought1Aug18Callfor。

28

Break-EvenonAugExpiration:

-Profitsabove18。

55andbelow16。

45

-Lossesofupto。

55btwn18。

55and18andbtwn16。

45and17

TRADERATIONALE?

ThemoveseemedcheapwhenIlookedatityesterdayandisonlycheapernow,JDSUresultslastnighthasgiventhetelecomequipmentspaceabidcoupledwithATTs?

acknowledgment?

thattheyareleavingcapexspendingwhereitis。

TradeUpdateAug6th,2012?

SincebuyingtheSeptputspread(detailedbelow)lastThursday,CSCOhasrallied6%andthe?

structurehaslosthalfofitsvalue?

Myconvictionlevelandthetradebiashasnotchangedasaresultinthealmost3。

5%rallyintheNasdaqinthesameperiodoftime,nothinghaschangedotherthanmarketsentiment?

IwanttogobackandremindmyselfofwhatIsaidThursdayinaneffortnottotreatthiscurrentlossasanythingmorethanitisalowconvictiontradegonebadintheshortterm。

Fromoriginalpost:

MyView?

Iwanttomakealowpremium,definedriskdirectionalbetthatCSCOmissesandguideslowerandthestockre-teststhe52weeklows?

Iwanttobeclearhere,IwouldnotshortacheapstocklikethiswithsomeofthepositivesthatImentionedabove,ButIwillallocatesometradingcapitaltotheidea?

ThisisnotahighconvictiontradeasIwillneedalotofthingstogowronginashortperiodoftime,butIliketherisk/rewardsetup,risking。

35tomake1。

65ifthestockmatchesthe2011lowfollowingwhathasbeenahistoricallyvolatileeventforthecompany。

NowIhavebeendoingthisawhile,andIclearlyrecognizethefactthatifthemarketisgoingbreakthrough1400andpossiblymakenewhighsinthedays/weekstocomethatitwillneedsomebroaderparticipationfromsomelargecomponents?

InvestorsareunderweightlargecaptechloserslikeCSCO,DELLHPQ,andgiventherelativeunderperformanceoflate,andcheapvaluations,theyarenotdifficultnamesforPMsatlargefundstoaddtoinanefforttoplayalittlecatchupwith?

Mytrade,whileclearlywrongforthetimebeing,willlikelynowtakealittletweakingtobreak-evenandbeprofitable?

SometradersIknowwell(EnisandCCtonameacouple)dontgenerallyliketoaddtolosingpositions,butItendtobeabitmoreimpetuous,especiallywhenIthinkthestockhasmovedonair?

AtthispointwiththeSept13Putsofferedat。

03(Isoldthemagainstthe15sat。

10),Iamgoingtocoverthemastheyhavea3delta。

ACTION:CSCO(16。

80)Sept13PutBuytoclosefor。

03?

NowIessentiallyowntheSept15Putsfor。

38

ButIamalsogoingtoBuySomehigherSeptPutstocaptureapotentiallynegativemovefollowingearnings。

NewTrade:CSCO(16。

80)BoughttoopentheSept16Putfor。

42,Iwilllooktospreadthisifandwhenthestockretreatsintoearnings。

IknowIambeingalittleundisciplinedbydoublingdown,butIamgoingtojuststickmytoeinthewaterabitandbuyalesseramountoftheSept16PutsthanIownoftheSeptPuts15s?

Myconvictionlevelisntanygreaternow,butifthecompanydoeswhatIthoughttheycoulddolastweek,the?

likelihood?