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2024
October 24th, 2014 at 12:22 pm
Now we have the highs, we'll see what happens here. Draghi's weekly stimulus talk still does its trick.
Oil shot back to $81.25 again, what a joke!
MCD/Scott – They spend Billions (forced franchisees to spend) to change the look but it never occurred to them to change the friggin' food! They added coffee to be like SBUX an DNKN and smoothies to be be like SONC and JMBA but they did nothing original.
BKW/Tri – My thoughts on them? Same really, our only play was to take advantage of the pop to sell into the excitement back in Aug:
It's a drawn out process, whether it goes through or not and, at the moment, the 5 short Jan $30s are $2 ($1,000) and the 4 long Apr $30/34 bull spreads are $1.60 ($640) for net -$320 off the $800 original credit so up $480 so far (60%). Other than seeing that opportunity at the time, I could care less about BKW/THI. I do like WEN on the Buy List, however:
Steak and Shake/Tri – I didn't think the Burgers were that good. We have Zinburger around here – people love that. My kids and their friends (12-15) don't go for MCD or Taco Bell (YUM) or BKW anymore, they like PNRA (not CMG), California Pizza Kitchen and CAKE and those places that give you 3 Asian courses in food courts.
I think it's Michelle Obama's fault – these kids actually are starting to understand how unhealthy certain foods are.
Duff/Toe – I agree with his logic – those are the current and future consumers.
MCD/Mill – You need to look at a put and decide if the amount you can still collect (0.20) is worth the margin you are tying up. In the Income Portfolio, for example, we sold 5 SBUX 2016 $65 puts for $6.35 and now they are $3.40 and up almost 50% with a year to go and the margin is $2,200. It doesn't matter what we sold them for – what matters is, is it worth tying up $2,200 to make the $1,700 that's left?
Obviously it is and then you need to consider how confident you are in the strike (extremely) and how much you REALLY want to own 500 shares of SBUX for $65 (absolutely). The last factor is, of course, how much spare margin you have and, in the Income Portfolio, we have over $800K to spare so it would be idiotic to close those puts (and you could easily argue that we should sell more).
So the real answer here is that you need to understand what it is you are risking and have a criteria check-list you go through to decide which positions to leave open and which to pull back. Of course, you also need to consider your overall view of the market as well as whether or not, if the market does plunge 20% overnight, you would end up too overweight in that sector – that's a factor as well. Then the last thing is, since you are up 90% on the short MCD puts – if you let them go to 80% and don't stop out – I shall chide you a second time!
That being said, if you are in a volatile position that is up 90% with a year to go (or even a few months) and you intend to stop out at 80% (as you should) and you think there is anything more than a 33% chance that you'll end up stopping out, then why not take the 90% gain and be happy?
OIH/Butterfly, Palotay – We sold the Jan $50 puts ($1.85, now $6.50) but I think we were waiting for a bounce to sell some calls. $42 to $46 was 10% so we expect a $1.60 pullback (strong) to $44.40 and, as long as that's holding, we can hope to move past this weak bounce (down from $56 to $42 (down 25% is down 20% with a 20% overshoot) is $12 so $2.50 bounces to $44.50 (where we are now, weak) and $47 so $47 would be our target sale if we look at all weak there.
Since we actually expected a 20% pullback on OIH, that would be $44.80 – so you can see why it's such a magic number. That's an $11.20 drop and that makes the weak bounce $2.20 to – Ta Da! – $47. Isn't math great?
RUT/Jasu – Notice /TF is back at our 1,113.50 shorting target. I think it's the leading indicator, not lagging.