Trade Details: Bought to open 10 Oct 16th Fitbit Inc. (NYSE:FIT) 14 calls for $1.20, $1,210.36 total cost (91.7% of account), 44 days to go. The trade executed at 10:01:12 when the stock was approximately $14.49.
Potential: Unlimited, but targeting $17 for underlying stock to exit the trade before expiration. Should FIT trade through the $14.39 level, reevaluation of the position is prudent.
Thesis: FIT traded down on Apple's release of the updated Watch line. I don't think the added features or Nike partnership/version will have material impact on the positive fundamental momentum reported by Fitbit on the August earnings call. The Watch's higher price point, features saturation, battery limitation and lesser social network should keep it out of Fitbit's core market.
Yesterday's trade flipped sentiment sharply negative sending FIT through a few levels of support (see chart below). With the above position, I'm betting that FIT holds in here and sentiment shifts positively near term. Given a correct entry, the October expiration allows time for fulfillment of the cup and handle pattern from the May lows to the target shown.
Broadly, the long trade feels dicey in this market environment. Pundits seem to be aligned, calling for volatility in September and a market pullback. I hope the contrarian move, looking for an unusually mild month, works.
Note: Luck exists in trading as it does on the felt. I could have already been stopped out of this trade had I been executed on one or two orders yesterday at higher levels.