DLTR FDO Earnings Play — Third and Final UPDATE

This three part trading mini-series started out as a risk management post.  In Part One I laid out how I scaled down my position into earnings and reiterated my conviction to the short side by stating that I would get back in post-earnings.  Reducing risk not only saved me money during a low probability event, but it allowed me to reapply capital at a better entry.  In Part Two I outlined managing the winning position.  I gave a few levels that I was willing to add to the position and levels to take profits.  I stuck to my plan and added to the trade as it went against me for a few days.  It never got close to my parameters for stopping out of the position.

This morning I had the enjoyable experience of walking into the office and learning of a news event in my favor.  Nelson Peltz’s Trian Group disclosed a healthy stake in FDO boosting the share price 6%, and pushing the spread in two standard deviations.  I don’t really care what Mr. Peltz plans to do with FDO, I’m just happy that he was on my side of the trade.  His activity and business interests in FDO have nothing to do with my trading plan and will not change how I manage my position and risk.

Trian Buys Big Stake in Family Dollar (CNBC)

For the record, I reduced most of my position in the morning but I still have a small amount on.  And by small, I mean “bus fare” sized position.

I’ll make an effort to produce some more posts on the mechanics of these trades.

Here are links to previous posts on this pair.  Everything is time stamped in Twitter:

Part One – Playing Earnings – Zero or Hero

Part Two – DLTR FDO Earnings Play — UPDATE

Here is the chart sequence:

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