I sold about 40% of my shares today. I stated my reasons here:
I still think that further short term decline in the stock price is likely. I did not rebuy any of the shares that I sold today, but I have thought about this a bit more. Some additional things I’ve considered:
I think I know this business well.
I trust their CEO.
I think there’s a very good chance that SHOP will crush expectations at the next earnings release in early November.
I’ve been hoping for an opportunity to initiate a trade based on a stock price pop post-earnings, but I could not justify it because of my large position.
I think SHOP will increase by a lot from here in the long run.
So the stock may continue to drop. I accept that risk. But toward the end of today’s trading day, I decided to “replace” most of my sold shares with the following trade:
BUY Jan 2020 $120 calls
SELL Nov 10th 2017 $127 puts
The trade was a even trade that replaces most of the shares that I sold today with upside calls options that don’t expire for another 2 years and 3 months.
The short puts are the risky part of this trade but if the stock spikes after earnings in early November then these puts may well expire worthless giving me my “shares” back. I have a large cash position now (11.3% of my portfolio) to protect me in the event that the short puts cause me problems.
The next month should be interesting…