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Trade Alert – Buying puts in a Red Box

April 12, 2013 by Cody Willard

“You wanted the best and you got the best! The hottest market in the world, S&P 500!” – Kiss Alive II

Markets are down a bit this morning, but obviously still near their newest, latest and greatest all-time highs. There’s a lot of greed out there amongst the retail crowd right now, and a lot of fear of underperformance among the pro crowd right now. I continue to preach patience and hedging the portfolios while we are at this particular phase of the market.

If you’re a new subscriber or if you’ve been waiting to build up some of your long positions, I would start slowly buying about 1/4 as much of each position as you’ll eventually want to own. You don’t have to draw a magic line in the sand and hope your cost basis is somehow never going to be breached. Let the market bring the action to us. This advice right here right now is as valuable as some of the best quick option home runs you get from me sometimes. Because not losing money and not being greedy keeps you from losses. And losses, of course, are the ultimate enemy.

As for trading, I’d look at buying some puts on some some high-risk, highly-volatile highflyers like WAGE and CSTR. I don’t know what WAGE’s downside catalyst near-term is, but I don’t like what I see in that company and it’s on my “get short someday” list.

And as for Coinstar, I think they are the Nook to Netflix’s iPad, if you know what I mean. Coinstar’s RedBox Instant is beta-max to iTunes’ VHS. Follow me? CSTR reports earnings on April 25 and I’m going to add a small tranche of puts here in it this morning. I’m bidding on the July and October expiration dated puts with strikes from $52-60 or so. I will leave this as a small trade until we get closer to the earnings report and then I might add another small tranche to it then. Like I said, we’ll let the market bring the action to us.

Twelve o’clock, I gotta rock 
There’s a truck ahead, lights starin’ at my eyes 
Oh my God, no time to turn 
I got to laugh ’cause I know I’m gonna die 
Why? – KISS (Detroit Rock City)

KISS Alive II Full Vinyl Album

 

 

 

 

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Filed Under: Trade Alert

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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