jay_beckner

I play poker and trade options, seeking edges from study, reflection and analytics.

#006 YNDX Call Spread

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Trade Details: Bought to open 15 Oct 22nd Yandex N.V. (NASDAQ:YNDX) 21/22 call spread for $0.65, $996.22 total cost (26.0% of account), 17 days to go. The trade executed at 10:36:09 when the stock was approximately $21.90.

Potential: 53.8% before commissions

Thesis: Yandex has been recovering from mid-September weakness following a failed ascending triangle breakout. The stock retested the resulting downward trend line Sep 24-25th and again pulled back (see chart below). Today, YNDX finally broke through a couple downward sloping trendlines warranting a new long position. The momentum indicators on the hourly chart are supportive, particularly the reaching momentum and RSI values. With implied volatility high and a moderately bullish bias, I decided to use a vertical call spread expiring before earnings on Oct 27th.

YNDX recovering from September weakness and gaining momentum.

YNDX recovering from September weakness and gaining momentum.

Historically, YNDX has shown correlation to both tech and the oil market. I view this trade as gaining exposure to oil with less volatility. WTI recently broke out of a symmetrical triangle in a bullish manner (see chart below). Between now and the next OPEC meeting in November, I think the price of oil will grind higher to the broad benefit the Russian markets (and Yandex).

Bullish breakout of symmetrical triangle for WTI.

Bullish breakout of symmetrical triangle for WTI.

Divergent USD/RUB and RSX trades have been bullish for YNDX in the past.

Dollar/Ruble diverging from Russian stock market.

Dollar/Ruble diverging from Russian stock market.

Finally, I think the M&A environment bodes well for the group.

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