I like the story of Roblox, anyone who has kids painfully knows how addictive this platform is and with their community of developers and players, this will just go places. The IPO action was somewhat disappointing as it just traded in the 70-100 range with no fireworks but clearly, it was working on something
Over 6 months it created a solid base that was just ready to explode when it does. Those long IPO bases are extremely powerful and once broken, it doesn't look back.
These bases can be 6+ months and sometimes over a year, a good example for a long IPO base was $FB
So, it was well worth the ER loto, we alerted back in October
And took the following position (looking for ER ramp + potential explosion)
The thought process is we see a ramp into ER which combined with premium rising could allow us to take some off pre-ER. Fortunately, it didn't work as planned and we held into ER
Now ERs are risky, it's a binary event and not only you need to be in the right direction but also overcome the expected move. Our play was targeting an explosive move with limited risk (position size) so we decided to ride it as loto
After hours, RBLX just exploded, it was clear it's not only going to clear the trendline but also has enough momentum to breakout to new highs, given this is an IPO base breakout, we were expecting for volatile action but to hold the breakout point around 95 (which it did)
Even with the strongest conviction, you never know what could happen so taking profits early is always a good thing with focus on reducing risk as soon as practical
From here it was a waiting game, we picked up some NOV 110 along the way (on this IPO base retest) and waited.
Typically a good target for IPO base breakout is 50% which was around 140-150 and it happens fairly quickly, it doesn't mean it's done then but that the "easy" move was made. As unrealistic as it seemed when RBLX is at 100, we expected it to push to 140-150 in a few weeks. On ER day we published our short term targets
and updated as it continued going up
while peeling off along the way
Our focus was to cut off the shorter term as it might base at any point after such a move and ride the DEC expiration as it will hold value far better
This morning, Morgan Stanley rewarded us with a nice upgrade getting us to our 139 target so we didn't want to "push it" too much and ended up cutting the remaining positions
and ended up cutting the last few
Now while this all worked out in a span of a week, still illustrates the value of positioning shorter-term and longer-term. Having Nov expiration allowed us to take profits quickly and reduce the stress of cashing out Dec