Velodyne Lidar Diagonal Calls (VLDR)

Initial Trade on February 2nd

Buy 3x Dec 17th 2021 $12.5 Call – $11.90

Sell 3x Feb 19th 2020 $30 Call – ($0.65)

Total Cost – $11.25

Break Even At Expiration: $12.50 + 11.25 = 23.75

Initial Thoughts on Trade

Autonomous cars are on trend as an investment thesis and this stock was brought to my attention as worthwhile for speculation. With the stock in the low 20s and trading in a fairly narrow range for the last month, it feels like a good time to get in using a deep in the money call. I picked December 2021 to give this trade some time to play out and I will use short out of the money calls to bring down the cost/break-even of this trade over time.

Trade Update on February 19th

The stock is down slightly, but the $30 calls will expire worthless. With an earnings event coming up on February 25th, I’m going to pick a higher strike call for March to give myself some more runway for profits while receiving a decent premium.

Sell 3x Mar 19th 2021 $35 Call – ($0.90)

New Cost- $11.25 – $0.90 = $10.35.

New Breakeven At Expiration: $23.75 – $0.90 = $22.85.

Trade Update on February 22nd Today the company made a significant announcement relating to the board. This, in addition to overall volatility of the tech sector hurt the stock significantly. Obviously this is bad news for our trade. Our short $35 call is pretty much worthless and no other strike in March is worth rolling down to so, we’ll just wait and see what happens post earnings.

Trade Update on February 27th

The company reported an average quarter and as a result, the stock tanked along with the rest of the market this week. The stock is now trading in the mid $14s, well below our break even price. I definitely am not looking to add more to a company with in-house board issues. I will look at the options chain in the coming week to determine if there are any calls worth selling at this point to try and salvage the trade.

Trade Update on March 1st

The main catalyst has come and gone (earnings) and the $35 short March calls are essentially worthless. With the stock trading in the mid $16s, the long $12.50 strike call is trading around $7 which is about a 30% loss. At this point, breaking even would be nice so with I decided to roll down the $35 strike calls as follows.

Buy 3x Mar 19th 2021 $35 Call – $0.10

Sell 3x Mar 19th 2021 $22.50 Call – ($0.45)

New Cost- $10.35 – $0.35 = $10.00

New Breakeven At Expiration: $23.75 – $0.90 = $22.50

I hope VLDR can run up a bit at least going into this expiration. We will revisit this trade at that time.

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