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Tumbling Tuesday – NoKo’s Missile Test over Japan Freaks Markets Out

It's always something, right?

We don't know what specific event we are hedging against but mornings like this remind us WHY we hedge our portfolios.  When the market is priced to perfection, it doesn't take a great deal of effort to bring it down and, this morning, all it took was North Korea firing a small test missile 1,700 miles, right over the top of Japan.

While the missile was still in the air, Japanese authorities sent an alert to northern areas near its path.  “A missile has apparently been launched from North Korea. Please take refuge in a sturdy building or underground,” the alert said. The warning was lifted a few minutes later, after the missile went down in the Pacific.  Japanese Defense Minister Itsunori Onodera said initial analysis suggests the missile was an intermediate-range ballistic missile of the same type that North Korea fired on May 14th.

Just last week U.S. Secretary of State, Rex Tillerson, praised North Korea for exercising “restraint” in not having conducted any missile tests during joint annual exercises between the U.S. and South Korean militaries, which began on Aug. 21st but are still ongoing – so much for that!  “How the U.S. responds to this provocation will be closely watched by both Japan and South Korea, and could be a critical moment in alliance relations,” said Jenny Town, assistant director for the U.S.-Korea Institute at Johns Hopkins University’s School of Advanced International Studies. ?Given the administration’s strong response to the earlier threat against Guam, she said, “a tepid response now to this missile test further erodes U.S. credibility with our allies.”

Image result for kim jong un trump

There is nothing more terrifying than a power-mad authoritarian ruler with a bloated ego that has to constantly be stroked by his sycophantic followers who have to primp up even his smallest accomplishments to keep him in a good mood, to prevent him goes off the rails and doing something even crazier than usual.   A "leader" like that thinks nothing of lying to his own people, restricting freedom of the press and blaming all of his administration's troubles on scapegoats – firing (or murdering) staff members whenever something goes wrong for them.  Imagine having to live under the rule of someone that crazy! 

When people have no faith in a country's leadership, they also tend to lose faith in its currency and the North Korean Won dropped 0.4% overnight but that could have been worse if the Dollar had not dropped 1% as gold shot up 2.5%, testing the $1,130 mark.   Silver flew higher too, hitting $17.60 and that's going to be good for our Trade of the Year on WPM, as well as our early Tuesday morning list of mining stocks I liked for our Members.

Usually, when the Dollar drops, the market adjusts upwards but our Futures are down about half a point – indicating things could be worse if the Dollar were stronger.  Europe is down 1-1.5% but the Global Markets have shaken off the increase possibility of nuclear war before – so let's not jump to conclusions as this is just the same channel pullback we've been playing for since last week (as we expected in yesterday morning's Report).

We took the usual Russell (/TF) Futures short yesterday and cashed in this morning at 1,370 for a gain of $640 per contract on 3 short contracts for a nice $1,920 gain to start our day.  The Dow (/YM) gave us a nice 200-point drop from 21,850 and that was good for gains of $1,000 per contract at 21,650 while the S&P (/ES) fell from our 2,450 line to 2,420, which is a gain of $1,500 per contract and the Nasdaq came down from 5,850 to 5,780, which was good for gains of $1,400 per contract.  

You can join us later today for our Live Weekly Trading Webinar at 1pm, EST by SIGNING UP HERE.  It will be open to the public today and we will demonstrate some of our Futures Trading Techniques, discuss our support and resistance lines and even discuss some hurricane trade ideas

Early this morning (5:22 am), I put up a note to our Members to cash in on those index shorts as we expected a bounce and now we'll see if the bounces are strong or weak and that will determine how we play the day.  We already took the opportunity to go long on Oil Futures (/CL) at $46.50 and Gasoline (/RBV7) at $1.565 and already those two contacts are up almost $1,700 at 8:30 - so the morning gets better and better for our early-bird traders.

That one trade alone more than pays for almost 6 months of our Trend Watcher Membership, which allows you to view the comments in our Basic Chat Room, along with my trade ideas, every market day – it's our most popular Membership at the moment.  We're also doing very well over at Seeking Alpha with our Options Opportunity Portfolio, which just had its 2-year anniversary on Aug 8th with 211% gained in two years.  That does not, of course, include our Futures Trading – we consider that to be gambling and it's just something we do with fun money while we are waiting for our boring old options trades to bear fruit.

For example, Gary (gh123) over at Seeking Alpha suggested we look at Coeur Mining (CDE) back on March 23rd and we liked where they were going and thought the sell-off was overdone.  That's the kind of OPPORTUNITY we look for and then we constructed the following OPTIONS trade to take advantage of it:

  • Sell 10 CDE 2019 $7 puts for $2.05 ($2,050)
  • Buy 15 CDE 2019 $5 calls for $3.90 ($5,850)
  • Sell 15 CDE 2019 $10 calls for $2.10 ($3,150)

That's net $650 on the $7,500 spread that's $4,260 in the money to start. Worst case is owning 1,000 shares at net $7.43 (a bit cheaper than it is now) and best case is making $6,850 (1,053%) over $10. TOS says net margin is $1,110 so super-efficient too!

Though CDE is only up about 0.75 from where we started, our conservative spread gave us a very good net entry of $7.43 on 1,500 shares and, so far, after 6 months out of 20, the short puts are $1.35 ($1,350) and the 2019 $5/10 bull call spread is $2.70 ($4,050) for a net of $2,700 and a profit of $2,050, which is up 315% on cash in just 6 months but only "on track" for our full 1,053% expected gain.  In fact, this trade, right now at $2,700 can still return $7,500 for a $4,800 gain (177%) in 16 months.  Once again, even the leftovers from our trades are better than the best ideas from other newsletters!  

That's how our Options Opportunity Portfolio is able to gain over 100% per year.  No matter what the market, there are always opportunites that Fundamental Investors like us can take advantage of and options are simply a way to leverage (and hedge) our bets so that we make huge multiples when we're right and limit our losses when we are not.  

Once you learn that you don't have to swing for the fences to make fantastic returns (you just need to use better trading tools!), you will enjoy trading a whole lot more.  As we say over at PSW, it's "High Finance for Real People – Fun and Profits" – if you are missing either of those two in your trading day – come and give us a try!  

 


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  1. Good Morning


  2. Morning all! Slight schedule change! We're have the weekly webinar today! 1pm (Eastern). 

    Join in here:

     http://philstockworld.enterthemeeting.com/m/RNJ6H9A8



  3. It's now impossible to get news from your social media:

    http://lifehacker.com/how-to-recognize-russian-propaganda-on-social-media-1798503783

    Well, there has: According to Isaac Arnsdorf, writing for Pacific Standard, the same Russian bots that flooded social networks with Russian propaganda during the 2016 election are now at work pushing far-right views on social media. Arnsdorf writes: “Hordes of automated bots generating Twitter posts and much more last week to help make right-wing conspiracy theories and rallying cries about Charlottesville go viral.”

    And when you demonize the MSM, people won't be able to distinguish news from propaganda. Orwell was only off by 30 years or so.


  4. Chart of the day:

    http://www.motherjones.com/kevin-drum/2017/08/chart-of-the-day-corporate-tax-payments-1952-2017/

    Republicans are right: corporations are clearly groaning under the tax burden we impose on them. Their taxes need to be cut ASAP.


  5. What do best investors do:

    https://behavioralvalueinvestor.com/blog/2017/8/27/what-do-the-best-investors-do-that-the-rest-dont

    2.   Ability to do nothing most of the time. Most of the time there are few good investments that combine sufficient business quality with a large margin of safety in the form of a large gap between price and intrinsic value. That doesn’t mean that great investors are spending all of their time relaxing on the beach – to the contrary, they are typically avariciously reading and studying business and industries, preparing for the moment when securities of companies they understand well can be purchased at attractive prices. It does mean that they make investments infrequently, and that most of the time when they look at a potential opportunity they end up passing. Those who are unable to maintain this state of low activity frequently end up making questionable investments to satisfy their desire to do something, and more often than not it is their brokers who are the biggest beneficiaries of their elevated activity levels.

    Others at the link!


  6. Good Morning.


  7. Gold up again.

    SBGL – Up 25% since I posted about it on Aug 1.  And it's paying a nice dividend.  May look to cover some today, although the options are very illiquid.


  8. Phil –  "We don't know what specific event we are hedging against "

    On the wavelength? I don't know but I'll tell you… today,  for reasons unbeknownst, I have this morose, niggling, like something has or is about to, go very bad feeling, in the pit of my stomach.  We hope this unusual and inexplicable feeling does not lead to one of these moments. Let's be careful out there and Out.


  9. People were really crazy with home equity loans in that bubble:


  10. doesn't look like market is too concerned over N Korea.  Nothing truly rattles this market yet.


  11. rustle--only TEVA is concerned. POS


  12. DJ Gilead Sciences Price Target Raised to $85.00/Share From $79.00 by Credit Suisse 


  13. FTR. Not sure what this means, but I got assigned 1400 shares on an ITM short call I have. TDA says they can't find the shares to borrow so I have to close out the position.  Not a big deal, but what's  it mean when shares to borrow can't be found?


  14. just means you can't stay short the stock stock that was assigned (short).

    sometimes it helps move the stock higher when these hard to borrow stocks get a little squeezed..

    Man, FTR could use all the help it could get!


  15. Good morning!  

    Friggin' Oil eating up all my /RB profits.  My fault for not scaling back when I was supposed to.  Grinning and bearing with 6 contracts:

    My break-even where I should have gone back to 2 was $46.875 and I would have been thrilled to DD here and go back to 4 at $46.50(ish) avg. if I had played it correctly. 

    I have to do TV tomorrow morning so we moved the Webinar to today at 1pm as last time it was too hectic trying to do everything on the same day. 

    Got 1,377.50 again on /TF for the re-short. 

    Playing for very quick in and out moves.  Europe seems to be improving so $250 on a quick rejection is great for me (2.5 points, 2 contracts).

    Orwell/StJ – Sadly, he essentially wrote the playbook they are following.

    Corporate tax cuts/StJ – And what's amazing is that the people can't grasp that SOMEONE has to pay taxes and, if it's not going to be the Corporations – then who will it be?  Idiots!   Although the Democrats are also idiots because they can't put a simple chart like that on TV and explain it though, of course, Bernie Sanders tried to do that and, essentially, the Billionaire-owned media froze him out from coverage.   We're already way down the rabbit-hole. 

    Nothing/StJ – My favorite thing to do!  

    SBGL/Albo – Very nice.  

    Disturbed/Naybob – We'll see what the indexes do but we've been seeing signs of a bigger breakdown on the Big Chart since last week. 

    Home equity/StJ – That's one way in which we're better off now than we were 10 years ago but, unfortunately, Consumer Credit is back at those highs due to Student Loans, Auto Loans and Credit Card debt.  

    TEVA/Jabob – Being sued by law firms like these lovely people.   Until they get a CEO, they will be vulnerable to the vultures.  

    FTR/Jet – Well it mechanically means people who own the stock aren't willing to lend it, probably because they expect the dividends (0.60) on 9/14.  That payment is kind of a built-in hedge, which is why $12 was my target as it made the dividend 5% per quarter, which means you're never far away from another big payout.


  16. So far, it's the usual 1.1Bn barrels in the front 3 months:

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Oct'17 46.86 46.96 46.22 46.24 10:09
    Aug 29


    -

    -0.33 347748 46.57 535948 Call Put
    Nov'17 47.23 47.32 46.68 46.69 10:09
    Aug 29


    -

    -0.27 107594 46.96 243739 Call Put
    Dec'17 47.55 47.61 47.08 47.08 10:09
    Aug 29


    -

    -0.19 87057 47.27 331457 Call Put
    Jan'18 47.79 47.82 47.40 47.42 10:09
    Aug 29


    -

    -0.10 47405 47.52 166147 Call Put
    Feb'18 47.85 48.00 47.64 47.75 10:09
    Aug 29


    -

    0.03 28299 47.72 72465 Call Put

    Aside from freezing oil that's being produced in place (as they can't ship it out), there's a lack of demand in a major market as the roads and airports are closed and the storm is still raining – so the damage isn't done.  As the US has been exporting 2.5Mb/d – we're one of the World's largest exporters now and that's another reason Brent is up $5 to WTIC – because the supply we don't ship out has to be made up by OPEC and Co.

    Meanwhile, if you think about it, we just involuntarily took at least 1Mb/d offline and oil can't even hold $47.50 – that is REALLY bad going forward.  

    An interesting trade would be going long 2 June 2019 contracts (/CLM9) at $48.68 and sell 20 USO Oct $9.50 calls for 0.40 ($800) as 10 of those sales would be an $8,000 hedge ($4 contract) to the downside and if oil pops 20% and you have to pay back $2 ($4,000) oil would be $55 and your 2 contracts would be up $6,320 each ($12,640).  

    Climate change is on its way to becoming a far worse public health crisis than any of those other problems. Already, it has aggravated droughts, famines and deadly heat waves. In the United States, global warming seems to be contributing to the spread of Lyme disease.

    “The heaviest rainfall events have become heavier and more frequent, and the amount of rain falling on the heaviest rain days has also increased,” as the National Climate Assessment, a federal report, found. “The mechanism driving these changes,” the report explained, is hotter air stemming from “human-caused warming.”

    Heavier rain can then interact with higher sea levels to increase flooding, as seems to have happened with Harvey. In Houston’s particular case, a lack of zoning laws has led to an explosion of building, which further worsens flooding. The city added 24 percent more pavement between 1996 and 2011, according to Samuel Brody of Texas A&M, and Houston wasn’t exactly light on pavement in 1996. Pavement, unlike soil, fails to absorb water.

    How the Fed's Money Printing Impacts the Markets – And What It Means for You

    Bitcoin hits a record high above $4,600

    The Air Force admits it has a clandestine base in the UAE — via

    Russian Central Bank Bails Out Otkritie Bank, Country's Largest Private Lender

    In case you still have any friends who still believe Obamacare didn't stop rising health care costs – here's the Fed's study and this very obvious chart (Affordable Care Act enacted 3/23/10):

    Levee broke in Houston, more flooding.

    White supremacists joked about using cars to run over opponents before Charlottesville marches

    2 yrs ago, Houston-area GOP lawmaker slammed Homeland Security Dept for spending money to prepare for climate change

    Trump nominated a climate denier as USDA chief scientist – here’s why that matters

    Heaviest rainfall in 12 years paralyzes India's financial hub via

    Massive Finnish pension fund unloads U.S. stocks; CEO says "it seems as if there is no president in the U.S."

    Euro jumps above $1.20 for the first time in 2 1/2 years--a growing headache for the European Central Bank

    Indexes almost back flat – amazing!  


  17. Currently projected storm path may take out more refiners, lowering demand for oil further:

    Gulf of Mexico production outages fell to 331,370 b/d of , ~19% of capacity, as drillers restarted after , says

    Harvey swamps Texas oil industry

    We also have an updated map to go along with today's factbox. More on refineries and infrastructure:

    Oil Tumbles Amid Speculation Up To 30% Of US Refining Capacity Could Be Shut

    Ships carrying ~15.3m bbl of imported crude oil are drifting near Texas ports, unable to offload because of closures:BBG

    I'm long 10 now at $46.48 – down about $5,200.

    Yesterday we bottomed out at noon and bounce 0.60, that would get me even from here so fingers crossed but we might test $45.75 first.  


  18. Phil – Climate - Just scroll down and read the headlines for this week: California Getting Cooked, not even Long Beach, San Diego or San Francisco could escape. Click here, then click your heels three times and repeat, there is no global climate change, and Out. 


  19. All we need is a 'little' shake to go with our bake….. ;)


  20. Phil/CHL

    Got called away just before ex dividend date!!

    Missed the dividend AND its tax benefit.

    To make matters worse, stock is up $0.60 on ex dividend date (after accounting for the dividend drop).

    That's a bummer and seems to happen WAY too frequently.

    What trade here, now? Still have the short $55 puts…I think


  21. Phil,

    I have -10 IMAX Dec $29 Puts (Down $7.5K ) and +10 Dec $23 Calls (down $3.5K). Would you suggest rolling to the Mar $23 Puts and the Dec $17/22 bull call spreads?


  22. CHL – Maya, Same here.  I received a message from my broker and they referenced this memo from OCC.  It left me with my PUTS, but I closed the position this morning.   

    OCC  (memo 41710)


  23. test


  24. CHL-Maya – Same here for me.  I received a msg from my brokerage house.  The referenced a memo from the OCC.   Memo 41710.   And, I just closed out my PUT on the position.  I tried to buy the stock and cover, but the system tells me it is unable to fill a short non-standard option.  Anyway, I'll miss that nice dividend!!

    By the way, my "TEST" message.  The system would not let me leave a message in the chat room.  So, I rebooted my PC, cleared my cookies, and logged back into my torguard.  Now, all is good.  


  25. Phil,

      I started with -4 ABX Jan 2018 $7 Puts with +4 Jan 2018 $5/$10 bull call spreads. I was assigned on 3 of the $10 sold calls, leaving me with 1. So I'm left with -4 $7 Puts which look like they will expire, +4 of the $5 Calls, -1 $10 Call and short 300 shares. I'm net $2106 on the set. 


  26. CHL/Maya – If all you have is the short puts, then those are in good shape and, worst case, you'll have your cheap entry again and, if not, you collected more on the puts than the dividend would have paid.  That's why we don't play too many of those big dividend payers with short-term options, it's too annoying getting called away all the time.  Of course, that's what I love about FTR and TEVA but… you know…

    IMAX/Kevin – The Dec $29 puts are now $10.60 so I guess you sold them for about $2.50 and your obligation was net $27,000 so I'd just roll to 15 of the March $20 puts ($3) for $4,500 as it's better to sell premium (that you know for sure you'll collect) than to try to make it all back at once.  Net obligation becomes $30,000 + the $6,000 you're losing on the roll is net $36,000/1,500 = $24/share is what you're in for at that point and that's almost a 50% rise from here so certainly ambitious enough.  Since you already own the stock at $24, it doesn't make sense to DD by spending $3 on the March $17s.  I'd sell 10 of the $19s for $2 ($2,000) and only cover with the $17s if IMAX is back over $20 for about $4 and that would put you in the $2 spread for net $2 but the real point is your net on the short March $20 puts would be on track to be up $4,500 and half your losses are almost erased with very little additional risk.  Along the way, you can always deploy more cash as we get more information.  Better to deploy cash AFTER you get better information – not just because you are losing money at some arbitrary point. 

    Nice gains BDC.  

    • An overnight North Korean rocket launch is hitting stocks globally, but it's not enough to arrest the strong downtrend in King Dollar, which is off another 0.4% to its lowest level since early 2015.
    • The dollar's slide began at the start of this year. Pick your reason, but one decent one – the Fed then was the only hawkish central bank around. Two rate hikes later, investors are questioning whether the Fed might move to the sidelines for at least a bit while other central banks take up the hawkish mandate.
    • Goldman for years has among the most strident U.S. economy bulls, and it's not giving that up. Mike Swell from the bank's asset management operation fully expects the Fed to continue with a string of rate hikes, and – while acknowledging that long dollar has been quite the pain trade – says now's a "very, very attractive" time to buy greenbacks.

     

    • The hawks and even some middle-of-the-roaders on the FOMC no doubt want to raise rates again at the mid-September meeting, but those who buy, sell, and hedge the level of short-term interest rates are now pricing in less than a 25% chance of another rate hike at any point for the rest of the year.
    • Helping today's drop in rate hike expectations is North Korea's missile launch. Bigger picture, the regulatory reform and tax cuts promised by the current administration are bogged down in the D.C. mud.
    • Checking the long end of the curve, the 10-year Treasury yield has dropped four basis points to a new 2017-low of 2.11%.

    • Oil prices extend yesterday's losses to trade at their lowest levels in more than a month, as refinery outages following Hurricane Harvey continue to raise concerns of weaker demand for U.S. oil; WTI -1.6% at $45.80/bbl, Brent -0.6% at $51.57.
    • “The fact that U.S. Gulf Coast refinery capacities of ~2.5M bbl/day are out of action because of Harvey is weighing on WTI. By contrast, the oil production outages in the Gulf of Mexico and at the Eagle Ford shale play amount to less than 1M bbl/day," Commerzbank analysts say.
    • The storm mostly skipped the offshore platforms and instead forced refineries to shut down, which will "increase stocks which are already far too high instead," Mark Yusko, CEO and CIO at Morgan Creek Capital Management, tells CNBC. "So you're going to see some negative pressure [on crude oil prices] in the short term."
    • Yusko is sticking with his year-end forecast of WTI in the $40-$60 range, but due to Harvey he now expects prices will stay at the lower end of that projection longer.
    • Tesla (NASDAQ:TSLA) is down 1.86% in a move that is being attributed in part to Uber's (Private:UBER) expected hiring of Expedia CEO Dara Khosrowshahi to lead the company.
    • KeyBanc calls the development an important shift by Uber to value the marketplace over cars, which in turns diminishes the odds for an extensive Tesla-Uber partnership.
    • There's also a note out from Baird on negative survey responses from Tesla customers on service and quality, although the overall read-through on Tesla owner loyalty is positive.
    • Source: Bloomberg
    • Previously: Expedia board member says CEO intends to leave for Uber (Aug. 28)

    • Valeant Pharmaceuticals (VRX -8%) continues to test the resolve of value investors and bargain hunters. Shares are down on modestly higher volume on the heels of a bearish $7 price target by Mizuho Securities which maintains its Underperform rating.
    • Analyst Irina Koffler cites a range of weaknesses in the company's business and expects it to miss its 2017 revenue and EBITDA guidance, adding that its Dental unit is no longer strategically attractive due to reimbursement headwinds.
    • Source: Bloomberg

    • There's some collateral damage in retail after Finish Line (FINL -26%), J. Jill (JILL -14.5%) and Best Buy (BBY -10.3%) disappoint with earnings.
    • Finish Line lowered guidance dramatically, while Best Buy called its Q2 mid-single digit comp "not the new normal" to take the sail out of an initial premarket rally.
    • Decliners include Conn's (CONN -4.2%) from the BBY news and Shoe Carnival (SCVL -4.9%), Boot Barn (BOOT -3.8%), Caleres (CAL -2.2%), Christopher & Banks (CBK -7.5%) and American Eagle Outfitters (AEO -1.6%) from the Finish Line/J. Jill's developments.
    • The SPDR S&P Retail ETF (NYSEARCA:XRT) is down 1.12% on the day.
    • Best Buy (NYSE:BBY) reports comparable sales rose 5.4% in the U.S. to smash the estimates of analysts.
    • U.S. appliance comparable sales were up 5.8% and comparable sales in the U.S. computing/mobile phone category were 6.7% higher.
    • The retailer says U.S. revenue was $8.27B, while international revenue came in at $668M. Domestic comparable online sales roared 31% higher. As a percentage of revenue, domestic online sales rose to 13.2% from 10.6%.
    • "The increased topline expectations are being driven by the anticipation of continued positive industry and consumer momentum, coupled with the impact of product launches. From a profitability perspective, while our original full year guidance anticipated an increased level of investments for FY18," says Best Buy CFO Corie Barry.
    • The company expects Q3 revenue of $9.3B to $9.4B vs. $9.0B consensus and EPS of $0.75 to $0.80 vs. $0.65 consensus.
    • Previously: Best Buy beats by $0.06, beats on revenue (Aug. 29)
    • BBY +3.87% premarket to $64.90.

  27. Phil – I didn't buy GBTC unfortunately! Always felt like a 40-60% premium of NAV was a little much…


  28. BBY --  LOLZ why does anyone invest in retail anymore these days.


  29. I got $20k to throw at puts/shorts – not touching these bleed-up markets just yet. There will be a time where all news is bad news, we aren't there yet.


  30. ABX/Kevin – Nothing wrong with that.  Lucky for you they came back off $18.  Of course, the idea would have been to take advantage of the uncovered calls and cash them out too.  The bottom line is you should have cashed that out a while ago as you were so deep in the money.  I'd cash in and move on, you can do better things with $2,000 than tie it up to make maybe another couple of hundred in 5 months.

    I said on Monday that ABX was still cheap and now it's up $1 but, as a new play, I like:

    • Sell 5 2019 $17 puts for $2.15 ($1,075) 
    • Buy 10 2019 $15 calls for $4.30 ($4,300) 
    • Sell 10 2019 $20 calls for $2.05 ($2,050)

    That's net $1,175 on the $5,000 spread that's $3,500 in the money to start.  Worst case is you own 500 shares for net $19.35 so it's a bit aggressive that way but room to sell more puts and roll lower if they pull back.  Upside potential is $3,825 (325%) in 16 months and ToS is only using $850 in margin on the puts, so it's a very efficient way to make $3,825! 


  31. OOP, webinar time! 


  32. Hi Phil, I could not miss your comments on CHL. This is exactly where I have commented to many times on plays, where the strangle or straddle is far out not just the next month, Armchair Trades!. These next month plays are only good for cherry calls, but than here we have mostly companies paying low or no div. holding the Leap BCS against 1/2 the cherry call.

    BTW my armchair trade on CHL was buy the stock and sell the Mar18 55/57.5 strangle. You are good for the div. and good for the option. The option play was 3.95 and the combined return is 1.79% per month


  33. VLO/Butterfly – We're covering with the 2019 $70 calls at $6+ and selling 1/2 (10) of the Oct $67.50 calls for $2.50+


  34. There goes CLF!


  35. Palotay – Thanks.  Not long any stock, but short a bunch of puts.

    How about you ?


  36. I have a bunch of 2019 $5 calls, only 25% covered, with 2019 $10 calls.  Am also short $10 puts.  I'm waiting for $9.00+ before I sell more calls.  This should be a >$10 stock soon.  


  37. Phil – CL – Please explain how you did get to that CL will get to 45.75 before turning higher? It got to 45.77 and it turned higher. It is not magic right? :)


  38. Well that was good, called oil long at $46 in the Webinar but I stopped out of most of my bloated position at $46.25 as that cut the loss to $1,500 and now I just have the 2 longs left into inventories.  

    Our last Webinar trade was shorting the Dow (/YM) at 21,845 and we'll see how that goes.  Volume is low today and the move in the Dow is up 200 since 5am so weak pullback takes us to 21,810 for a $200 per contract gain if it works out.  

    CHL/Yodi – Very true. 

    CLF/Palotay – Got a Zacks write-up.

    Why Cleveland-Cliffs (CLF) Could Be Positioned for a Surge

    Trump says storm was epic.  

    /CL/Bulls – $47 – 2.5% is $45.82 and oil tends to gravitate towards 0.50 and 0.25 lines and a bit of an overshoot is to be expected so $45.75 was the closest likely line and then, since that was a $1.25 drop,we expect 0.25 bounce to $46 (weak) and $46.25 (strong) so once we got over $46 without a significant pullback, it was very likely we'd be moving on to $46.25 at least, so I made the long call.

    5% Rule is not magic – just math!  cheeky


  39. An other boring stock for you Armchair quality

    MO good to buy again for 63.80 and sell the Mar 18 strangle for 6.20 I actually got it for 6.47 earlier puts 1.75% in your pocket every month.


  40. Thank you for the explanation.


  41. MO/Yodi – I always like them when they are cheap.  

    You're welcome Bulls. 

    Indexes still punching higher into the close – added another /YM short (2 now).

    /KC with a nice pullback – maybe another entry opportunity at $128 if we're patient, about $132 on /KCH8


  42. Well, it counts as a strong recovery but, on the whole, we're only back to our shorting lines. 


  43. Yodi,  what strike price on MO?  Thanks


  44. Taihu,

    Sorry someone must have red the play MO Mar18 65/62.5 c/p I got it for 6.44


  45. Taihu with this one you even can sit in your armchair and smoke it, adds value to your stock price!!!!


  46. Might do when they get into different smoke….


  47. taihu, good idea I think they gearing up to this. I got plays with PM as well but my stock purchase price is much lower. So at 116 I would not recomment to start any plays.


  48. Yodi/Tai – "Might do when they get into different smoke…. gearing up" – Commented herehere, here and here on that.  MO have been gearing up for decades, they are in position and will pounce the minute legalization is wide spread enough and Out.



  49. CHL/Phil/Yodi

    The short calls were the $55 Jan 2019 calls. I think we have the trade in one of the portfolios.

    So, only the short puts are left in my acccount.

    It seems, they call you away even if the options are longer term and in this case, the stock was trading only $0.60 above the call away price. The dividend is $0.70


  50. Phil — may have missed it on the call, I was away for a bit.  CL — we are still long right into the Labor weekend? When do we switch short?


  51. Korean missile/Phil – The latest launch is in the news, but there's a lot of other things going on as well – a collapsing bridge with suspicion of corruption is an equally big story (http://m.koreatimes.co.kr/phone/news/view.jsp?req_newsidx=235510), a couple of teenage girls murdered a younger teenage girl, the new president is re-opening the old Truth and Reconciliation Commission, with an emphasis on the 1981 Gwangju massacre, so at least here in the south, The Kid has a lot of competition for news time.

    We had a rowing festival here last week (http://dgbc.dgist.ac.kr/) with teams from all over the world, and our college president made a point of saying "Your news outlets may have you concerned about safety, so we're glad to see you here, but we Koreans have 5,000 years of history and we can handle our crises." A little optimistic, and the old fart anti-commie conservative politicians are in a lather about having a liberal president, whom they are depicting as weak, a man who will be deceived by The Kid and his gang up north, but that seems like their usual noise to me (especially since they were beaten so badly in the last election).

    The Kid's point in flying one over Japan is likely to call Trump's bluff, to show a credible threat to the US bases, to threaten Japan as a US ally (a really stupid move, IMHO), but also to display the range of his weapons to China, with whom he is currently not getting along. The Kid has yet to pay a visit to China, and before Xi came into office, China was supporting The Kid's brother to replace him – hence the assassination. Interesting times.


  52. CHL/Maya – I think it has a lot to do with your broker.  When I was at Options Xpress, they used to assign me constantly.  I'm not sure if it was because I traded a lot and got some proportion or perhaps just because they knew it didn't bother me, so it was easier to stick assignments on me rather than deal with people who freak out on them.  At the time, I thought it was normal (though it hadn't happened at Fidelity when I was there or GS) but then I switched to ThinkorSwim and now I hardly ever get assigned.  

    /CL/Latch – I'm still long 2 with a break-even at about $46.75, so down about $1,000.  Probably won't add any until after inventories, though API is encouraging.    

    The latest American Petroleum Institute (API) inventory data for the week ending August 25th recorded a draw of 5.78 million barrels after the draw of 3.60 million barrels last week and compared with consensus forecasts for a draw of around 1.9 million barrels for the week.

    It is important to note that the latest data was compiled before the impact of Hurricane Harvey with the initial impact seen in next week’s release.

     

    Gasoline was reported as a build of 0.48 million barrels after a build of 1.40 million barrels previously while distillate registered a draw of 0.49 million barrels following a build of 2.0 million barrels for the previous week.

    There was some disappointment surrounding the gasoline data with markets expecting a small decline in stocks for the week.

    Cushing registered a build of 0.58 million barrels following a significant draw the previous week.

    As to when to go short – well, there's a chart for that:

    I'd say, POSSIBLY, we're weak enough now that $48.50 may be the new shorting zone (so all levels drop $1.50) but we need more data in a very fluid situation so unless, like I just did in the past 24 hours, you can ride out a very quick $6,000 loss back to a $1,000 loss and be happy about it – I wouldn't mess around.   It could have just as easily turned into an $11,000 loss.

    Korea/Snow – Sounds like fun and excitement.  In my opinion, what Kim did was the logical thing to do.  He showed he couldn't be intimidated, demonstrated the range of his missile and CAREFULLY aimed it, not a Guam, which would have forced Trump to react as he backed himself into a corner, but he threaded the needle between Russia and Japan and aimed AWAY from China, which emphasizes his strategic use as an ally in the area.  

    Image result for north korea missile map

    And look at the effect, a total freeze while everyone tries to figure out what to do.  He's got everyone running around talking about him and his countrymen see that he stood up to the big, bad US President.  Big win for Kim.  

    Give my love to the Princess!  


  53. I assume this is from the contract rollover:




  54. Finland says no fighter deal with Boeing after Trump’s comments


  55. North Dakota tribe levies higher tax on oil drillers


  56. Phil/CHL

    THANKS!

    Talked to my broker….I did not know and it was not well advertised…CHL paid a special one time dividend of $2.00 plus on top of their regular $1.04 dividend (which apparently had gone up from the prior $0.8)

    So, that makes sense…just wish I had known.

    Win some, and not so much win some, I guess. 



  57. NoKo/Phil – that's a pretty darn good analysis, Phil. Thanks. (she says hi back).


  58. Thanks for CL comments Phil. Also NoKo POV is interesting. 


  59. when you're in a bubble, you're in a bubble: everyday we wake up and ask "how many more $B will crypto be worth today?"

    Today we woke up and it was  $163B and at the "close" its $166B. What'll it be tomorrow?

    This is nuts.


  60. My two cents: Russia and China tolerate the pliable NoKo regime which allows for its existence. Without it, there would be no North Korea regime, period. The price the paid for the service of acting and a wasteland buffer where the general population accounts for $1,700 GDP per capita and Fat Pig Boy's highly celebrated army gets served 3 spoonfuls of rice for lunch (those are the lucky ones).

    The alternative could be a probably-democratic, western-style adversary (US ally) sharing China's 900 mile border and Russia's 24-mile border which is a non-starter for them, especially for China. They know full well, Japan, which went from a completely devastated war-torn wasteland in 1945 to the world's second largest economy in 40 years (and $39k GDP per capita), and Japan-modeled south korea coming along nicely ($38k GDP per capita) largely did so because they are relatively free, democratic societies. China for all its economic bluster is less than half as rich per person ($14,600) and Russia's ex-Soviet Dictatorship turned Putin autocratic oligarch isn't much better ($26k GDP pp, but not widely distributed).

    Having a despot wasteland like North Korea ($600 GDP) also be conveniently belligerent against their principal adversary, is well, frosting on the cake.

    Now with our Orange Turnip situation here in the US, with his obvious anti-democratic tendencies, it still remains a long row to hoe before we're an autocratic Russia or China (he's trying hard). In the meantime, they'll just go ahead and let a few missiles fly around and keep the Wasteland status quo in place until such time we capitulate from awesome freedom we have now to the despot-nationalism in this country that trump and his supporters so desperately desire. 


  61. Good morning! 

    You're welcome Maya.  As a rule of thumb, you should put your ex-dividend dates on your calendar and consider pulling short calls from stocks you want to make sure you collect from if their premium is lower than the dividend.  If the premium is more than the dividend, then you don't care if they call you away.

    Analysis/Snow – See, I pay attention!  wink

    You're welcome, Latch.

    Worth/BDC – A tenuous concept.  

    Despot Nationalism/BDC – Where are most of the new Billionaires being created?  China!  This isn't about GDP per capita – for that, Democracies with Capitalism win hands down, this is about making the 0.0001% much richer and, to do that, you have to destroy Democracy people we, THE PEOPLE, might eventually notice that about 3,000 people are accumulating 90% of the Nation's wealth.  As Warren Buffet said:

    There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” 

    The problem is the average idiot in the Top 1% think Buffett is talking about them when the reality is anyone with less than $100M is just roadkill to the Billionaire class.  


  62. Good morning! 

    The Dow popped to 21,944 and I added 2 more at about 21,915 so now 4 short at 21,877.50 into the GDP report.  

    Oil just tested $46 so I added another long so 3 long now into inventory.  I'd be more aggressive but I'll be in NY (TV this morning) for both reports and not able to trade them.

    Yesterday was another one of those days when decliners beat advancers in a rising market:

    Europe is up half a point but down off the open – not as relived as we are:

    12,250 to 11,900 is 350 so weak bounce is 11,970 and strong is 12,140:

    3,460 to 3,360 is 100 so 3,380 and 3,400 are the bounce lines.

    Can't call the Dow weak – even if you zoom out.  Or the Nasdaq

    /ES 2,500 (which we never made) to 2,400 (20% retrace from 2,000) gives us bounce lines at 2,420 and 2,440 so over 2,440 is simply bullish.

    RUT 1,450 was tested in July and then 1,350 so 1,370 and 1,390 are significant and we just failed 1,390 at 3am:

    I still like shorting /TF at the 1,385 line (now) with tight stops above..

    /NKD 20,250 to 19,250 gives us 200-point bounces to 19,450 and 19,650 so not too impressive on the Nikkei but we know that's because of the weak Dollar, which GS said to bet on.

    I agree and I wish I caught 92 but I'll add on long /DX here at 92.40 and, if I were going to make a long bet on the indexes, /NKD would be a good choice over the 19,500 line.


  63. 5% rule – /CL

    Morning,  We touched the strong bounce @ $46.50 before the bell yesterday and it settled around $46.35. We tested the weak bounce $46.25 at the open last night. And, it is dipping below $46.25 now.  Does the 5% rule suggest what to expect next? 
     


  64. Failing a weak bounce is generally not a good signal but I'm betting on inventories to encourage the bulls.  


  65. Thank you Phil -  Starting to track the 5% discussion.