Exits, 5/19/2023

How we did on the trades we exited this week, and what we're doing to refine our approach.

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This Week’s Trade Exits

As soon as I exit a trade, I note that in the comments of the post where I first mentioned the trade; at the end of the week, I try to track them all in one post. These are the trades I exited this week:

Stocks or Exchange Traded Products

Prothena Corp., Plc (PRTA 0.00%↑). Bought at $53.33 on February 17th (as I noted I would here, the day before). Sold at $71.50 on May 16th. Profit: 34%

Options Trades

1. Put spread on H&R Block, Inc. ( $HRB ). Entered at a net debit of $0.40 and exited at a net credit of $0.70, as noted here. Profit: 75%

2. Call spread on Affirm, Inc. ( AFRM 5.59%↑ ). Entered at net debit of $0.44 and exited at a net credit of $0.50, as noted here. Profit: 13.6%

3. Put spread on Wix.com, Ltd. (WIX 0.00%↑). Entered at a net debit of $1.05, and sold for a net credit of $0.02 as noted here. Loss: 98%

4. Put spread on Tempur Sealy International, Inc. ( $TPX ). Entered at a net debit of $1.05, and sold for a net credit of $0.13, as noted here. Loss: 88%

5. Put spread on Fiverr International, Ltd. ( FVRR 0.00%↑ ). Entered at a net debit of $2.35, and sold for a net credit of $1.78, as noted here. Loss: 24%

6. Put spread on Corsair Gaming, Inc. ( $CRSR ). Entered at a net debit of $0.55, and it expired worthless, as noted here. Loss: 100%

7. Call spread on Eagle Materials, Inc. ( EXP 0.81%↑). Entered at a net debit of $1.73, and sold for a net credit of $3.08. Profit: 78%

8. Put spread on The Children’s Place, Inc.. (PLCE -5.54%↓). Entered at a net debit of $0.95, and sold for a net credit of $0.95. Profit: 18.8%

A Few Thoughts

We took some losses this week, for the first time since I started this weekly Exits post series a couple of weeks ago. Partly, that’s a function of closing out losing positions from the week before, such as the put spread on CRSR, but it’s also because we had a pretty bad week with earnings trades.

My starting point for researching most earnings trades has been social data, though I also look at technical and fundamental data for confirmation. This doesn’t always work though: Farfetch, Ltd. ( FTCH -6.04%↓), for example, had an aggregate technical rating of 0 and a fundamental rating of 3 yesterday (on a scale of 0-10, according to a data service I use) in addition to bearish social data, and it nevertheless exploded higher on an earnings beat after the close.

The virtue of social data is that it has the potential to give you some insight into fundamentals in between earnings reports: to over simplify, if the number of people raving about buying a new Tesla on social media is up X% in this quarter, that bodes well for Tesla’s second quarter earnings report. This week was simply not a good week for social data though, despite it generating good results in the quarter overall.

Refining Our Approach

Every trade posted on this Substack is one I make personally, and I don’t like losing money any more than you do, so I’m constantly looking at ways of refining and improving things. Here are a few things I have in mind for next week:

• Screening for more earnings trade candidates using fundamental and technical data alone. I did this with Eagle Materials, Inc. ( EXP 0.81%↑) and The Children’s Place, Inc.. (PLCE -5.54%↓) this week and exited both trades for gains (numbers 7 and 8 above).

• Using Portfolio Armor’s options sentiment in concert with fundamental, technical and social data.

• Continuing to refine my “market watchers” list. I keep a list of market observers on Twitter, that I periodically edit. When I get trades wrong, I look for who got them right and add them to the list to see if they just got lucky or have consistent insight. My list is another source I use for trade ideas.

That’s about it. I’ll be doing some homework over the weekend to come up with new earnings trades for next week, and of course I’ll keep working on other stuff like new bank trades (I ran into a setback with the bank list I had commissioned last week, but am working around it).

Have a great weekend.