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New York
Friday, March 29, 2024

Comment by phil

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  1. phil

    BID/DC – This is one of those stocks that has a p/e around 10 that I simply can't find any reason not to want to own.  That means, if you spent $5.50 on the Jan $23 calls and they are now $2.70, you can just roll them along to the 2018 $15 ($6.50)/25 ($3.50) bull call spread at $3 and then you're $5 in the money with 2 years to hit goal.  I'd also sell the 2018 $15 puts for $3.40 and sell 1/2x the March $22s for $1.05 because, if you have the discipline to collect net 0.50 per share every couple of months, that's $6 in your pocket while you wait for other people to realize that a company that has a market cap of $1.3Bn that netted $240M in the last 4 quarters might be something they want to own.

    It should be noted that, in the grand scheme of things in September, in the LTP, we sold 10 BID 2018 $35 puts for $7.40 and they are now $16.30 with BID at $20.  If we wanted to adjust them, we could roll them to 2x the $23 puts at $7 and we still would have collected net $5.10 or $2.55 per new share so we'd now be committing to buy 2,000 shares of BID at net $20.45, which is where it is now(ish).  

    If we were assigned we could then sell 2018 $20 calls for $5.50, that would knock our basis down to $14.95 and, if we didn't mind owning 4,000, we could sell 20 more $15 puts for $3.80 and now our basis is $11.15 on 4,000 (if assigned) and that's $44,600 which is exactly one allocation block in the LTP.

    This is why I struggle to worry about things like this.  On the whole – I'd rather end up owning 4,000 shares of BID for net $11.15 than "only" make $5,100 if BID is over $23 in 2018 and the short puts expire worthless.  Most likely, we'll never get another opportunity to own it so cheaply.

    If you have a properly allocated LONG-TERM plan for your positions, you will get excited about downturns like this because it gives you a chance to aggressively build up long-term bargains like BID or F or AAPL or IBM or the rest of our Watch List.  BUT, in order to do this, you have to get away from short-term thinking and stop letting your decisions be dictated by the interim P&L of positions you intend to hold for decades (if you get a good entry).  

    Oil $28.68 – Looks like we're seeing another show this weekend!  $28.50 is a stop now, of course.  

    Cruz/StJ – No promises but your threat made me throw up in my mouth already…



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