what I did with my SHOP shares

I bought Shopify 4 times this year.

January      $ 47.14  14.2% of eventual position 
April        $ 77.12  28.6% 
May.         $ 88.05  28.6% 
September   $ 123.66  28.6%  

The first purchase was in a regular brokerage account and thus subject to capital gains tax, the other three were in IRAs. When Citron released its short report I decided to sell what was in the IRAs. By the time I got permission I was able to unload all of the IRA shares for around $104.

Here is what I was thinking.

  • With Citron’s report, plus the follow-on by Cramer, the shares of Shopify were probably going to be down at least until earnings were released November 1. I could lock in my gains (or cut short my loss) and buy in at a lower price before the release. Since what I sold was in the IRA there would be no taxes.
  • My most profitable position was the one bought the earliest, in January. Even if the stock cratered, it was unlikely to go past the point I originally purchased it. So no reason to sell.
  • If Shopify beat expectations with their next earnings release the stock price would recover more quickly. However, if they disappointed, the bloom may have come off the rose and the sky-high valuation may never recover. In that case sales and profitability will have to catch and we just don’t know when that will be.

I decided to by back one half of the shares sold before earnings and one half afterwards. The timing of that second half is to be determined by the report itself.

I’ll let you know how that works out. :wink:

Still long SHOP
Explorer Supernaut
You can see all my holding here: http://my.fool.com/profile/TMFJebbo/info.aspx


I believe earnings are 10/31 and Pera gave a Trump-like ambiguous hint that his reply to the short sellers would be during earnings - possibly huge earnings.

With that in mind, on strategy would be to buy a call and sell a short with a November expiration (this is a synthenic long, or risk reversal). It could cost you nothing with the proceeds of the put sale financing the call buy. Something I am considering.

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You did mean “sell a short put” not “sell a short” right?

This does not cost nothing, you are on the hook for the shares from the short put. If SHOP gets whacked big time for some reason, they would be expensive shares to buy.


This seems rational to me. I never added to my original SHOP shares because it got away from me too quickly. My plan was to add on a major pullback which we still haven’t gotten. I’ll be watching the before and after earnings also. May add if we get a big(ger) pullback.


You did mean “sell a short put” not “sell a short” right?

Yes, sell a put. It can cost nothing initially, but yes, if the stock plummets it could cost you. But same true if you hold the stock. On the other hand, if the stock shoots up on great earnings and there is a short squeeze, and you didn’t buy the shares because you were waiting for the stock to fall farther, then you missed out big time. And that “costs” you.

This is an approach I have see the MF Options service use when I was getting them on a trial basis.

PH -

Another idea for you…

call ratio backspread (I learned about this thanks to Brian and Martin over on the SA options board). You sell a near the money or slightly out of the money call to finance two even further out of the money calls. (or 2 to 3, etc)
No risk to the downside as with puts - it gets tricky when the stock lands between the strike prices and you need to manage it as not to end up short shares. if you are long the stock then you would get called away at the strike price of the short call, and if it blows all the way through the owned calls then you profit from the owned calls.



long shop shares and calls, considering a January call ratio backspread - 95/105, 95/110, or 100/110