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Trade adjustment – Taser Int. (TASR) roll baby, roll

TASRTime to roll this stock lower and farther away in time. TASR started its consolidation in these couple of days when it bounced from 10s back up to $11 level.

It also reports earnings on July 30th before market opens. How will investors react to it? Will they like earnings or not? Will they send the stock lower?

The consolidation started on Friday by a heavy reversal trade. Today, it continued up again after erratic trading in the morning. Is the selling over or is this a dead cat bounce?

The outlook for this stock is negative in my eyes and what my indicators are telling me. The stock may still resume the selling in a couple of days. Many investors out there are expecting bad report this month which would send this stock to new lows.

I decided to roll this trade lower to protect it. I can roll it farther away in time, and as low as to $10 strike.

I can roll the trade down to 10 strike, into March 2015 expiration month, buy back 17 contracts and sell 30 new contracts, collect $98 credit in premiums and, the most important thing is, I will spend no maintenance cash. This roll will have absolutely no effect on my options buying power.

I will have to just wait longer for this trade to finally end.

A positive thing is, that naked calls and puts I had open a few weeks ago, which I closed last Friday offset my current loss from this trade entirely. I collected around $725 in premiums from naked calls and long puts while this trade is showing a loss of $833 as of this writing. No matter what happens, this trade should end as a winning trade.

If I roll this tomorrow morning, there will be three outcomes.

One, the stock resumes selling after the bad earnings report and I will be in a good shape. Even if TASR falls to $9 a share, I still will be in a good shape ready to roll further when time comes. It will be cheaper and affordable roll.

Two, the stock will not react negatively to the bad earnings report since all negative impact is already priced in during the recent sell off. Then the stock remains in this 11-ish level, I will be OTM and it will be a waiting game for the put contracts to lose value and expire worthless.

Three, the report will actually be positive, the stock jumps up again and will continue growing. Then my put contracts will start losing value faster and I should be able to unwind them earlier.

In any way, this trade is heading towards a winning trade after a long struggle to manage it. It however happens sometimes that some stocks will not behave and will make you crazy. The goal is to be able to sustain it. If you do not have enough cash, patience, or even knowledge, it is better to close a trade, take a loss and move on.

I am not that kind of person. I like a philosophy of Karen the Supertrader, who has a motto to defend premiums. I believe in it, I like it that way, and I will defend already collected premiums at all cost. I will not give it back.

And yes, if the stock reacts negatively on earnings or resumes selling, I will sell new calls to help offset my losses from puts even more. At this time it is too early to open these trades, I will wait for a new, resumed weakness.

Trade Detail

This trade consists of two legs of a diagonal put spread:

BTC 17 Dec19 14 12 put
STO 30 Mar 20 14 10 put

for CREDIT 0.98

Trading TASR was quite interesting over time. I started last year with this stock opening a total return covered call trade when I bought the stock and sold call against it. I made money. During the course of that trade the stock fell from $9 a share to $6 a share so I bought another 100 shares and sold another call against it. Both trades ended with great gains as the stock went up above $10 a share.

It continued even higher. So I started selling puts and collecting more premiums. The stock went even above 20 dollars a share and I collected nice premiums all the way up.

Then the stock collapsed. And again I rode it all the way down and now it looks like that I will and this relationship with TASR at $10 a share level. Exactly where I started a year ago. The good thing is, I made money and although it was a dramatic ride, I didn’t lose. So far.

Happy trading!
 
 





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