TOLL Brothers - Short Position Initiated

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TOL Dec09 Short

November 11th, 2009, 1:39 pm EST.   Posted under Margin Portfolio (MP) by ThetaTrader.
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11/11/2009 – ThetaOptions Margin Portfolio – Toll Brothers Short Play for Christmas…sounds yummy!

Toll Brothers gave us a nice fourth quarter report this morning….they’re loosing LESS than expected.  This company had a P/E of 6 back in the 2006 when they made $700M; and their stock traded at $30.  We seriously can’t see them maintaining a P/E of 20, while they continue to LOSE less than expected.  Therefore, rather than Short the stock @ $21, we decided to enter a DEC call side naked short in our margin account.

Order:

Sell to Open: (5) 22 DEC CALL – $0.85 credit

11-11-2009_TOL

Position: $2000 margin

11-11-2009_TOL_position

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2 Responses to “TOL Dec09 Short”

  1. ThetaTrader Says:
    December 2nd, 2009 at 10:13 pm

    Wow, 4400 options were traded on the $20 call side DEC strike today for an avg price of 55 cents.  Toll Brothers is schedule to report their earnings tomorrow & but some investors may have jumped the gun because the stock is already up 5% in after hours.  So let’s see what happens tomorrow.  Our 0.05 cent option buy back stood at a bid ask price of .05/.10 ALL day long; we were hoping to buy back all (5) contracts as the market fell back this afternoon, but that never happened.

    Hopefully TOL doesn’t rise more 10% tomorrow.

  2. ThetaTrader Says:
    December 3rd, 2009 at 9:44 am

    Toll Brothers dropped this morning to $19.10 after posting a worse than expected loss. Wait minute here, don’t stocks usually go up on that sort of news these days! Well, it looks like whom ever sold those $20 callers for 55 cents yesterday is in the clear….That would be $220,000 profit against $1.5 million risk in margin for 2 weeks…..of course this investor is NOT risking anything, they know which direction the stock is heading; right :-) Besides, the DEC 20 callers have already traded 1200 options in the first 10 minutes. So our mystery investor from yesterday has already made 30 cents per contract * 1200 = $36,000. Not too bad for days work.

    So we cleared our $22 “Naked Callers” and manage to keep the $0.80 premium after buying back our short callers this morning for 0.05 cents.  That’s $400 profit off $2100 margin for (4) weeks of risk or 18% return in (4) weeks. Not as good as the hot shot investor from yesterday’s action, but we’ll take it :-)

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