Perma_Pig

022. PIGGISH PLAY - LONG Digital Turbine + CRM Earnings Strangle

Long
NYSE:CRM   Salesforce.com Inc
Ever wonder what it would be like to have your cake, and eat it too?

Go ask Paylocity - it's the biggest mooch on the street.

Why am I starting with the optional/bonus part of this position?

It is because:

1) APPS technicals are so profoundly bullish that I may just avoid mentioning them entirely in this description, and
2) It's pretty damn funny to observe how parasitic Paylocity's stock price is when it poaches CRM's much-needed volume - only to cut all ties a few hours later, leaving the premises without waking CRM up in the morning.

Anywho, I think we might just have a very affordable , synergistic means of playing CRM's earnings report on Tuesday using Paylocity calls, APPS calls, and CRM puts. If CRM smokes its estimates, Paylocity will most definitely skyrocket given its latest performance and APPS will rip higher if it can hold that unbelievably steep lower trendline.

Seriously - this sort of consolidation is extremely rare for such a young company. It reminds me of how Tesla and Shopify used to be - before fundamentals were discarded for Stocktwit sentiment indicators - except that APPS's early stages seem even bullish-er.

Don't believe me?

Take a look at how both of these monsters grew up around 40 bucks/share and compare them against the top chart. APPS has them beat in every category; particularly its incredible rate of consolidation and ability to recover 4-5 points higher on any given day. While Tesla can do this on a much bigger scale now, it took them forever to get to this point. This stock can do the same damn thing and it's only at 40 .


Onto the Pig Play Details:

This is an Options-Only play that allows more risk to be taken because of the offsetting positions. If you want to buy and hold equity, go right ahead but I don't have an offsetting solution for you that would be worth the risk in this spot.

If Monday is choppy and slightly red, wait until the end of the day to enter all three positions simultaneously. There is zero reason to take on the additional risk for some sort of premium scalp if ZM catches a bid before it reports - or something like that.

On the other hand, if it is an insanely bullish day from the start because USD Monopoly Money is recognized as somewhat fraudulent by all of the countries that have been blindly buying our notes, then I'd recommend focusing on entering the APPS calls first and foremost, right on the button.



Now time for the Pig-Specs:

ALTERNATIVE 1: LONG BULL WITH SIMPLE OFFSET (APPS CALLS, IWM PUTS):

APPS (CALLS) - BUY - (45 Dollar Strike, 12/18/2020 Expiration)

IWM (PUTS) - Use about 1/3rd of the capital used to purchase the APPS calls and buy the second strike behind the then-current price and a 12/04 expiration. If you don't like wasting money, I suggest you

ALTERNATIVE 2: LONG COMPLEX SOFTWARE ER STRANGLE WITH (APPS CALLS, CRM PUTS, and PCTY CALLS):

1) APPS (CALLS ) - (same as above), you get to choose how many you want to buy since you are autonomous (unlike Paylocity). Just know that the net cost of the other two positions should roughly equal 75% of the amount allocated to this main long call position.

2) CRM (PUTS) - BUY - (1-2 PUTS, NEAR THE MONEY, EXP 12/04/2020 Expiration)

While these are both stupidly expensive and unlikely to hit, it is a NECESSARY part of this play. You are getting a severe discount on the relatively large number of calls that you wouldn't otherwise receive under 99% of circumstances. The overwhelming odds are that CRM beats and that the market will not tank until the NAS touches new highs. However, pay the premium so that you're hedged all day and avoid getting cute by waiting two hours for a discount .

Naht in this market and don't come crying to anyone if ya go forward unhedged.


3) PCTY (CALLS) - BUY - (220 Strike, 12/18/2020 Expiration)

Allocate 1/3rd of the amount of capital that you just spent on your offsetting CRM puts and purchase these unbelievably beautiful-looking calls that have a ton of implied volatility that will kick up the second CRM reports, a very nice amount of theta to work with, and a strike that can be very easily surpassed this week. Both these calls and the APPS calls are amongst the best deals I've seen all year.


Good Luck Ya Software Nerds.


- Software Appigation Strangler



NASDAQ:APPS
NYSE:CRM
NASDAQ:PCTY
AMEX:IWM




Trade active: for those that liked this idea and presumably have the nutz to execute it, I will offer you what my current positions look like. reason is because this market is going to become really hard to trade and my ideas are somewhat abstract, so id recommend fading what I have locked in place, just in case we some some whipsaw today:

Overnight Positions (not touching for foreseeable future):
1) TZA Calls, 1/15, $12
2) GLD Calls, 1/15, $182
3) SSRM Calls, 12/18, $17 (gold miner)
4) APPS Calls, 12/18, $45 strike
5) NVDA Calls, 12/18, $365/$395 split
6) This entire abount long in cash

Prolly gonna add a Tesla position (NIO Put to Offset given that tsla about to ruin that company's whole career) and some paylocity.

Now you all better follow thru and snipe some baggers by end of week.
Trade active: Lastly before the bell, please wait like 4-5 mins before buying anything after the open.

The few hundred bucks you might save if the market rips on the open is just not even close to worth the pain of getting cracked in the face by what might be an early bull trap to shake out the weak robinhooders.

Anyone offering the advice to "trade safe" is an idiot of sorts since trading this market is not safe period.

Thus, my advice is to just think for a minute before you end up panic selling, or worse, panic buying. GL.
Trade active: enter 1/4 calls, both apps and pcty
Comment: alright this dip is where the money is made. Got about 25 points more to the downside on the NAS futures.

You can "safely" start scaling in the apps now. focus on getting total position in and then sprinkle the pcty.

looks like were gonna have an exceptional day on APPS.
Trade active: Dont add any more PCTY. Add CRWD instead.

175 calls for this week.

Now you got three horses instead of one.
Trade active: Sell CRM Puts, replace with APPS puts @ 40 for 10/18 with same quantity as calls.

Once finished, congrats, you now have blue skies arbitrage.
Trade active: On top of this, ZM just did us a very solid favor.

I probably wont comment from here on out until I sell my position (likely this week). Its gonna be difficult to pick out a price target, so if anyone here wants to contribute an idea, please do so.

All ideas are welcomed. Even if they are impossibly wrong I'll still say thank you.
Order cancelled: Equity futures look unstable at the moment.

I will likely let leave my puts and try to take my calls on the open.

Unless the futures turn it around to 1% or greater before the open, I'd rather not be tempted to buy into something slightly scarier than a standard 2020 covid pullback.
Comment: Hold, sell, I leave up to you.

Gonna hold half of both calls and puts through today.

Market is probably going to "J" shortly and will wait for NDX to reach an all time high.

What happens after that is up to the trading gods.

Best of luck.
Comment: Potentially, maybe, could have been a bit more patient here.

APPS close today was not real. That daily chart is ludicrous.
Perma_Pig

Comments

I got x100 options expiring 12/18 at the $45 strike. Looks like $APPS is still very bullish leading up to earnings. I am monitoring $CRM as well as it looks like its about to potentially bottom out.
+1 Reply
Perma_Pig maatspencer
@maatspencer, the concern I have with this week's software earnings are that they were pretty spectacular across the board, but were subsequently sold on news.

CRM just posted a huge bottom-line beat, positive rev guidance, and the acquisition of slack and it is down 4% AH. Similar story with ZM early in the week, albeit the sell reaction is a bit more justifiable than the one tonight. The clouds seem to either sell off as a group or get bought up as a group during their reporting week (recall August when they all went ballistic after CRM's enormous gap higher).

So, although the technical setup for the software companies (particularly APPS) into earnings is nothing short of spectacular, the entire market is floating on air right now and a shift to metals might be the straw that breaks the stock market in half. I'm looking to see if these bear ETFs break their key EMAs soon, which will be the signal for me to gtfo of APPS for the time being.
Reply
maatspencer Perma_Pig
@Perma_Pig, Lost my shirt this morning. People seem to be really freaking out about the Slack acquisition. I understand its being viewed as an overpay, but coupled with the Earnings report this seems an overreaction.
+1 Reply
Perma_Pig maatspencer
@maatspencer, yeah,i think its just that this market is tapped out of energy atm. its more a function of being the last group of tech companies in the reporting cycle in a fading market than anything else.

to say any company has paid too much in this market is just ridiculous when the valuations of each company is so subjective to begin with. When you base company's present value on future sales, thats when it gets stupid. As if anyone could know what sales will be years from now.

Anyway, point is that theres always an excuse for why something didnt hit, but i think its best to confirm any play with what the bigger picture is saying.

Sorry you got your shirt lost, happens to the best of us. Just try to forget about it and def dont re-enter. Just look for totally different move or else its gonna drive you nuts (speaking from experience here).
+1 Reply
Wow..very good write up.. I am following APPS from March so I am in the APPS Calls, 12/18, $45 strike...fingers crossed.. Thank you very much.
+1 Reply
Perma_Pig AYM2020
@AYM2020, appreciate that. and very nice.. need at least a hint at 50 for a gap to bag-land, imo.
Reply
Appreciate it..
+1 Reply
you are literally autistic
+1 Reply
Perma_Pig milty-friedman-3
+1 Reply
Wow. Phenomenal write up. Much appreciated
+1 Reply