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Which Way Wednesday – GDP Edition

To 3(%) or not to 3(%).

As you can see from the Fed's GDPNow forecast, it's raging ahead of the forecasts of our leading Economorons by a wide margin.  Usually, I bet against the Economorons but the Fed is full of them too so it's a toss-up as to who is likely to be more wrong but we have a short bet on the Dow Futures (/YM) at 21,900 that says it's the Fed.  

We took that bet in our Live Trading Webinar yesterday afternoon and added to it this morning as the Dow popped in early morning trading, getting all excited about a European open that's fading fast as of 6:35.  To some extent, it's a hedge against our long Oil (/CL) bet at $46.15, which is a double-dip from the bet that made us gains $500 per contract in the first hour of our live webinar (you're welcome!).  

This morning, Gasoline (/RB) is looking cheap again at $1.63, so I like a long there with tight stops below $1.625, which would still be a $210 loss as gasoline contracts are expensive at $420 per penny – so be very careful trading them.  We'll see if the oil inventories (10:30) can get both to break higher, the API Data was encouraging for the bulls, showing a 5.78Mb draw in crude, up from 3.6Mb last week but that data was through Friday – ahead of the storm.

Oh, and don't cry if you missed yesterday's PSW Report (subscribe here and never miss one again) but you know those Gasoline (/RBV7) contracts that were up $1,755 early yesterday morning at $1.585 and I said you missed the first 0.02 of the move?  Well, this morning we got the rest of the 0.10 to $1.655, so that's another $7,020 gained on our 2 long contracts, up $3,510 per contract – wasn't that easy?  

Remember, I can only tell you what is likely to happen and how to make money playing it – the rest is up to you…

That's right, while I was writing this post (now 6:56), the /RB contracts popped another 0.02.  The fluctuations are due to changing assessments of the storm damage and all we have to do to make money is stay ahead of those assessments by paying attention to the news flow and figuring out what's likely to be the story that gets distributed by the press.  Since I am the press AND an analyst – I have a good knack for figuring out which way the analysts will be leaning ahead of time and how it will be interpreted in the headlines.

Image result for feed a man a fishThat's what futures trading is all about – PAYING ATTENTION!  This information is out there but 99.999% of investors wait for someone to read it for them and explain it to them before making a decision.  Hell, they even wait for someoene like me to read the news for them and come up with a trading idea.  At PSW, we practice the philosophy of "Teach a Man to Fish" because it's much better when everyone is a good trader and our Members learn to come up with great trade ideas that they then, in turn, share with the group.

Getting back to Gasoline, we could see another 0.10 move in /RB, which is about 6% higher than we are now and the Gasoline ETF (UGA) at $28.06 so 106% is $29.74 and that's up $1.68 so we can buy the low-premium Sept $26 calls at $2.15 and hopefully collect at least $3 but don't be greedy – take the quick money and run and I'd set a stop if UGA fails to hold $27.50, probably a loss of 0.50 (25%) as the Delta is nearly 1.00 on those contracts.  That gives you almost the same leverage as a Futures trade.

See, trading isn't hard, just do the math and it becomes very clear which play is going to be right for the occasion.  Speaking of math, ours finds the GDP is likely to come in well below the Fed's forecast, probably below 3% based on the earnings reports we've been checking in on.  Very simply, we are still a consumer-driven economy and the consumer was not doing a lot of shopping in Q2.  

There are, however, signs that that might be turning around and we called a long on XRT for our Options Opportunity Portfolio subscribers last Thursday morning at $38.80 and now they are back after failing an attempt to get over $40 but it's a Jan trade idea that has the potential to make 222% on cash between now and then – so well worth checking out!  

The GDP report might send XRT back to the lows but it's data that, by definition, cut off on June 30th and we're betting on Q3, not Q2 and those are the kind of mismatches we love to take advantage of as traders (and many analysts) are not too bright and simply read the headlines before buying high or selling low.  

Speaking of analysts you should listen to (and do the complete opposite), we should have known the rally had more legs when Dennis Gartman "staked his reputation" that "the bull market has come to an end" on Aug 11th.  Even though I agree with him (see Aug 10th's "Faltering Thursday – Terror at Dow 22,000"), his record suggested making the contrary bet would be much more profitable.  My prediction on the 10th was that we'd have a 550-point correction from 22,000, which would be 21,450 and, so far, I'm off by 150 as we bottomed out on the 21st at 21,600.  We're not out of the woods yet as no one said it would all happen in less than a month and, as noted above – we are shorting the Dow here:

I have to go to the Nasdaq this morning for an interview so I'll miss the GDP fun but it's only 4 contracts short ($20 per point), so wish me luck!  

 

 


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  1. /CL — If the API report was so encouraging – why has there been no reaction to it in the futures?  I assume there are lots of professional traders looking at the same report.  Would you take their lack of response to be bearish?  


  2. Good morning! 

    I have to be over at the Nasdaq for my interview so back about noon.  

    Oil/Jeff – No one takes API seriously because, generally, it's just an informal telephone survey where they call commercial producers and ask them how much they have – it's known to be wildly inaccurate and prone to manipulation.  Also, the reports don't matter at all since the situation changed drastically over the weekend so oil is trading on speculation over how long refineries will be down, when the shipping channels open, etc and, meanwhile, the storm is still raging up the Mississippi.  

    25 Oil Tankers Stuck In Gulf, Unable To Offload Due To Harvey Port Closures

    RBOB Stable at 2-Year Highs After Big Crude Draw, Surprise Gasoline Build

    Giant Chemical Plant In Crosby, Texas Warns It Is In "Real Danger" Of Exploding

    As we expected, today's data off to a weak start:

    • MBA Mortgage Applications
    • Composite Index: -2.3% vs. -0.5% last week.
    • Purchase Index: -3.0% vs. -2.0%.
    • Refinance Index: -2.0% vs. +0.3%
    • 30 year mortgage rate  of 4.11% vs. 4.12%.
    • Sterling has hit eight-year lows of 1.075 against the euro as investors search for relative safety amid worries over the slow progress of Brexit talks.
    • European Commission President Jean-Claude Juncker blasted the negotiations, stating none of Britain's positions are "satisfactory," while EU chief negotiator Michel Barnier said the U.K. had to "start negotiating seriously."
    • Kim Jong-un has warned that Tuesday's missile launch over Japan was a "meaningful prelude to containing" the U.S. territory of Guam, adding that his regime would conduct more ballistic missile tests.
    • Yesterday's UN Security Council described North Korea's actions as "outrageous" and called for the full implementation of tough sanctions agreed to less than a month ago.

    • Bitcoin has been on a tear since it split in two on Aug. 1, resulting in the creation of bitcoin cash.
    • The traditional cryptocurrency hit a new record high on Tuesday, trading at $4,703.42, up nearly 70% for the month and up 350% YTD.
    • Institutional interest in bitcoin is also building: A new report from financial research firm Autonomous Next has identified 55 crypto-related funds.

    • Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFTannounce that Alexa and Cortana will soon talk to each other.
    • Simply say “Alexa, open Cortana” to an Echo device or “Cortana, open Alexa” to a Windows 10 device. 
    • Competitor Sonos is reportedly developing an audio quality focused speaker that also supports multiple voice assistants. Rumors have Amazon developing a new Echo with better audio quality to hold off both Sonos and Apple’s HomePod, which launches in December. 
    • The Alexa-Cortana compatibility will launch later this year.  
    • Previously: Amazon Echo goes out of stock; video app isn't ready for Apple TV (Aug. 29)
    • Toyota (NYSE:TM) plans to make an investment in ride-hailing player Grab through its Next Technology Fund.
    • Grab has 1.2M drivers spread across seven countries in Southeast Asia.
    • "Through this collaboration with Grab, we would like to explore new ways of delivering secure, convenient and attractive mobility services to our fleet customers in Southeast Asia," says Toyota exec Shigeki Tomoyama.
    • Financial terms of the investment weren't disclosed.
    • Tropical Storm Harvey is wrecking even more havoc after knocking out a fifth of the nation's refining capacity, sending gasoline prices to their highest since July 2015.
    • After drenching Texas, Harvey regained strength over the waters of the Gulf of Mexico and crashed ashore again in southwest Louisiana, according to the National Hurricane Center.
    • Gasoline futures +4.3% to 185.92
    • ETFs: UGA
    • Shooting for a major legislative victory before the year's end, President Trump dives back into the tax debate today with a speech in Missouri.
    • Reports suggest he will elaborate on plans to curb deductions for high-income taxpayers, but will unlikely go into other specifics.
    • Congress already has its hands full when it returns from the August recess, with topics ranging from the federal debt limit to hurricane relief efforts.

    China's $2 Trillion of Shadow Lending Throws Focus on Rust BeltRegional banks in China’s rust-belt provinces are driving the rapid expansion of shadow banking in the country, fueling a web of informal lending that poses wider risks to the financial system, according to a study by UBS Group A. Smaller rust-belt banks like Bank of Tangshan Co. and Baoshang Bank have been using products such as trust beneficiary rights and directional asset-management plans to hide the true state of their bad loans and circumvent lending restrictions, the study by analyst Jason Bedford said. Others have been using the shadow loan instruments to diversify away from lending in their struggling home provinces, exposing themselves to a much wider spectrum of Chinese corporate risk in the event of a default, according to the report.

     

    One World Trade Center Reveals Yet More Risks for Steel Industry. New York’s One World Trade Center is emblematic of a struggle by steelmakers to boost demand from construction, an industry that buys almost half the output of the alloy. While the Twin Towers it replaced were erected around scores of steel columns, the Western Hemisphere’s tallest building is held up by a concrete core to help prevent the kind of devastating collapse that followed the terror attacks of Sept. 11, 2001.

    Louisiana Braces for Harvey as Waters Keep Rising in TexasOfficials said already strained reservoirs would overflow for the first time ever.

    Rain record broken in Texas as Harvey dumps nearly 52 inches

    Houston Warns Bridges And Roads Are "Starting To Fail"

    Hurricane Harvey Likely To Destroy More Cars Than Katrina: "This Is Bad; Real Bad"

    United Technologies(UTX) Nears Deal to Buy Rockwell Collins for More Than $20 BillionThe tie-up that would create one of the world’s biggest aircraft-equipment makers.

    East Coast May Face Fuel Shortages After Storm Disrupts Major PipelineColonial, the biggest fuel pipeline in the U.S., says its system is starting to have problems in Texas.

    Amazon's(AMZN) price cuts at Whole Foods are 'more bark than bite,' says analyst

    Ivy League Profs vs. ‘The Tyranny of Public Opinion’A few brave scholars urge students to think for themselves.


  3. 3% on the button?  What are we, China?  

    I don't think it's strong enough to move us over 22,000 because it's no shock (less than Fed expectations) but still good enough to keep tightening on the table.  Good for our Dollar longs.  



  4. Good morning Phil, what will you be discussing at the Nasdaq this morning?


  5.  I think they want to talk about the accuracy of market data.   Nasdaq does not want me to discuss specific trades but I'll be on BNN next week, where we can have more fun.  


  6. Teva Pharma (TEVA) PT Lowered to $21 at Goldman Sachs

    August 30, 2017 1:58 AM EDT   Send to a Friend

    Goldman Sachs lowered its price target on Teva Pharma (NYSE: TEVA) to $21.00 (from $28.00) while maintaining a Neutral rating.Analyst … 


  7. Smart Money


  8. How to Get Rich in Trump’s Washington


  9. Morning all!

    Webinar replay is now up!

    https://youtu.be/DMXLblX9kBY


  10. Good Morning!







  11. Down again…geez

    FU TEVA!!!!


  12. Phil/CMG

    moving up slowly every day…is it the accumulation phase going on where the big funds accumulate it at lower prices and then give out good news for the sheeple to jump it? is there a way to tell?

    thanks and regards


  13. gild… no tease please


  14. After decades of dodging law enforcement and fighting for legalization, U.S. marijuana growers face a new challenge: low prices.

    So, my first assessment of this industry is coming to pass, namely commoditization.

    Next will be the continued flourishing of black markets avoiding onerous regulation.

    There will still be lots of dollars sloshing around so low cost producers and value added strategies will be the longer term winners. 


  15. CTL goes ex-dividend tomorrow by .54.

    Chance to capture 5 dividends in 13 months.

    Expect merger with LVLT to close by September 30.  California is the only state left to approve the merger.


  16. Jabob – GILD is certainly not teasing !


  17. OIL: -5.392M    expected -1.908M
    Gasoline: 0.035M   expected -0.989M


  18. just read ilene's interview of Jan Dash here. Very good! Read it.


  19. GILD, Held on to my 60/80 BCS that looked dead, selling 60 puts, now time to sell some close in calls. Also FU GE


  20. Phil – RB – is t a good time ot open a new position now?


  21. Phil,

    Do you still expect a move up in /CL into the holiday weekend? EIA data looked favorable for oil bulls


  22. Interview / BDC – Fake news :-)


  23. Yes, carefully, with tight stops below $1.65. 

    /ES 2,450 is another good shorting line.

    On my way back. 


  24. Oil/Japar – but, looking ahead, they will have huge builds, so 2-day play only. 


  25. Absolutely! Thanks Phil……where do you think it will peak? $47?



  26. TEVA getting clobbered again 


  27. Jabo – On the bright side, how's CBI and FTR lately?


  28. Jabo/Teva

    How about exiting your position but keep it on your watch list. Let them bottom and enter on a recovery? If it happens you're no worse off, if it doesn't at least you don't keep sustaining losses on it. Keep your current commitment available to repurchase when things seem to settle. You're hating this position and thats not going to change quickly. 


  29. yeah maybe enter TEVA at 8


  30. thanks..

    you guys are probably right.

    can't believe how low this POS is.


  31. Jabob – Stop losses. 

    Sometimes you get whipsawed, but it avoids disasters such as this.


  32. albo-- i hear you. You keep reminding us about them even if Phil doesn't believe in them and feels the only bad call/trade is when you piece in an average down and then the company goes to zero in BK.

    my problem with teva is that I owned a bunch of call spreads and was short 37.50s..

    the call spreads are basically worthless and now I have been assigned stock too. 

    I am not blaming Phil or anyone but myself.

    It just sucks to own something that needs to completely turn around their business and now I would need it to basically double to make up the losses.

    FTR too.

    FU ME!!!!!!


  33. DBA  Phil I am holding 50 of the Jan 18/21 bcs, bought at $1.90, now $.90. I think the premise was food inflation, but no sign of that now. Do you still see that as likely and if so, how would you adjust. Oh, I am also short 10 of the Jan 20 puts.


  34. Go CBI !


  35. Jabob – The problem with hanging on to a loser like this, and then buying more as it goes down is two-fold.

    As has been said, every time you average down, you are essentially admitting that currently that is the best place to put new money.  In a losing position usually still in a downtrend.

    Rolling down and out just to get back to even in a couple of years, or escape with a profit, just isn't worth it, IMHO.  Too much aggravation, not to mention opportunity cost.


  36. Jabob,

    I would agree with Albo on his tack and add its not just the loss in terms of coin of the realm, its the psychological (anger & depression) and physiological cost (adrenal stress). Admit the mistake, cut your losses and live to fight again another day. We've all been there.

    Do your best analysis, make a reasoned decision, set a stop (mental perhaps, but a stop nonetheless) and have your valet (or upstairs maid) give you a massage.


  37. 8800—hilarious!


  38. Phil – why is the drop in RB?


  39. Phil- With RB sinking to 1.63 and I initiated a position at 1.645, do you think it is going to give us one more chance before the weekend to get there again or did I go in after the opportunity passed? Seems like the refineries are not going to get back online right away, so I thought it might be a good play, but would like your opinion please. Thanks as always.


  40. Nice pop in oil, I see.  Just enough to pay for my sushi burrito. 

    Here's my favorite news note of the day:

    Asteroids pass close to Earth all the time. Earlier this year, a 10-foot (3-meter) wide NEO known as 2017 EA passed by at an altitude of just 9,000 miles (14,500 kilometers), well within the band of geostationary satellites at 22,300 miles (35,900 kilometers). It was detected just six hours before its closest approach.

    Thursday's is 3 miles wide – a "planet killer" if it were to hit us.  There's another agency we foolishly cut the budget on.  Doesn't matter what kind of climate you have when it's ejected into space on impact!

    Image result for asteroid earth impact gif

    CMG/Pat – Don't get too excited, just a weak bounce off $300 so far:

    $500 to $300 is a 40% pullback and down $200 means the bounces are $40 just to be weak – not even close yet.  $10 is a weak bounce off the more recent leg down so if you can't even make that – you are still in trouble.  

    Poor Jabob, he's been hurt so many times before….  angel

    Pot/Pstas – You mean the price of a weed goes down when it gets legal?  Shocking!  I grew up in NY and I knew a dozen kids who were able to grow pot on their property – and these guys didn't know anything about growing plants other than put the seed in the dirt and water it.  If it's legal to smoke – it's way too easy to grow for these prices to last.  Still, MO will be thrilled to sell you 20 joints for $20 in a pack and people will pay for convenience and quality control – that's where the long-term money is.  

    It's been a while since MO was cheap but they took a nice refreshing dip yesterday and now we can add the following plays:

    In the OOP:

    • Sell 5 MO 2019 $55 puts for $3.75 ($1,875) 
    • Buy 10 MO 2019 $57.50 calls for $8.70 ($8,700) 
    • Sell 10 MO 2019 $70 calls for $3.20 ($3,200) 

    That's net $3,625 on the $12,500 spread so we have $8,875 (244%) upside potential at $70 and we're $6,500 in the money to start.  

    In the LTP, we can afford to be more aggressive:

    • Sell 10 MO 2019 $60 puts for $5.65 ($5,650) 
    • Buy 20 MO 2019 $57.50 calls for $8.70 ($17,400) 
    • Sell 20 MO 2019 $70 calls for $3.20 ($6,400) 

    Here we have a net of just $5,350 on the $25,000 spread with $19,650 (367%) upside potential.  The difference is, in the LTP, we can easily deal with a move down in MO against our $60,000 commitment to buy the stock (which pays a 4% dividend) while in the OOP, we don't REALLY want to own it – so we make a smaller, more conservative commitment on the put side.  

    Peak oil/Japar – Well I was hoping for $48.50 but the hurricane has screwed that up, lucky to see $47.50 now.

    TEVA/Jabob – If you need a double to get even you should get out.  The only reason you should ever let yourself lose more than 20% is if you are 100% willing to add to the position and lower your basis on the way down and that includes planning on doing it again if it keeps falling.  So, at $37.50, you should be out at $30 (down 20%) unless you are going to be THRILLED to DD at $18.75, which would give you 2x at $28.13 and $18.75 is already down 33% at $18.75 and then down around $14 you want to DD again for 4x at $21 and still down 33% and, of course, you would sell puts and calls to lower that basis, hopefully to around 20%.

    BUT – If you are not going to be THRILLED to own 4x at $21, when the stock is at $14 and plan to be in it long enough for the stock to NORMALLY gain 50% (3-4 years growth) – they why the F did you not stop out with a small loss at $30?  

    You MUST have a trading plan for every position and, generally, with our LTP positions, our PLAN is to own 4x at 60% off our initial entry (if we should get so lucky).  Our PLAN is to then work the trade over the next few years, pare down our basis and, hopefully, when and if the stock comes back – we'll own a whole lot of it at a nice, cheap entry.  

    If that is not your plan – then get out of positions that move against you!  

    Sitting on TEVA at $37.50 and needing a double to break even isn't a plan at all…

    DBA/Jet – No, no sign of food inflation but it was a hedge against it.  In theory, you saved it by getting cheap groceries.  The Jan $18s are still $1.05 and they can be rolled out to the 2019 $17 ($2.40)/20 ($1) bull call spread at $1.40 so net 0.35 buys you a $1 lower strike and another year of hedging.  The Jan $20 puts I'd just hold until the end as you either get lucky or you roll them.  By the way, the storm is ruining the cotton crop but, sadly, DBA isn't big on cotton:

    Cocoa should come back now that the season is over:

    Hogs likely to do better and cattle assuming disruptions in TX cause supply issues. 

    Unfortunately, less cows = less need for cow food, which is also in DBA:

    CBI/Jel – Cool! 


  41. /NQ just blew through a resistance line started in July, do the TA experts in this group think this means 6K is in the offing?


  42. Phil, good problem for a change:  10 ATI oct 15/20 BCS ( basis 1.60), short  10 oct 17.5 puts (3.10). Close now, wait or roll?


  43. Phil MO I see you stealing my yesterday Armchair trade. Stock pays 4.12% nothing to sneeze at.


  44. Today sums up nicely why I don't short the market in the last week of a month going into a holiday.  Window dressing on light volume.  Think today is the big oomph where many will now be satisfied and take off the next couple days.


  45. Opportunity cost/Albo – I guess, in the LTP, I'm filling out a diversified portfolio so TEVA fills a slot in biotech/Pharma at a price I consider cheap so, if I'm going to kill it, I have to find something I like better and most of their peers are overbought, except GILD (got em), AMGN (got em) and THC (got 'em).  So, if I were to close TEVA and our $56,000 commitment that's down $24,000 – I'd have to either find a new phama I like better over the same period or add more to the others.  As it stands, our TEVA adjustment from the LTP review was:

    • TEVA – Priced like they are going BK.  Our 15 2019 $37.50 short puts are $20 ($30,000) and we can roll them down to 30 of the 2019 $25 puts at $9 ($27,000) so -$3,000 and we collected $14,000 originally so net $11,000/30 is $3.666 so our break-even is $21.333 – seems reasonable.  The 10 $25 calls are $1.45 ($1,450) and we can roll those down to 30 of the $17.50 calls at $3.60 ($10,800) and I'd rather not sell calls for now.  We have a $9,000 loss from before so we're in for $20,000 on 30 $17.50s less net $11,000 collected on the short puts is $9,000 or $3/contract and that means over $20 we start making money (over $22.50 because of the puts) and at $25 we'd suddenly have $22,500 for a $13,500 profit despite the hard fall.  Meanwhile, we have plenty of room to add more cash if we have to.

    So not only does the restructure move to eliminate the $24,000 loss, it also sets us up to make $13,500 at just $25 in 16 month, which would be a $37,500 turnaround.  PFE is another one I like but can't see a good way to make $37,000 on PFE using just $4,700 in margin.

    /RB/Bulls – Well the EIA was a bit of a demand disappointment and people are taking huge profits off the table.  Right now, the market is flying around with rumors and updated estimates of refineries, etc.  As I said last night – too chaotic to trade if you aren't comfortable with wild swings.

    /RB/Craigs – So you just ignored this from the morning post?

    This morning, Gasoline (/RB) is looking cheap again at $1.63, so I like a long there with tight stops below $1.625, which would still be a $210 loss as gasoline contracts are expensive at $420 per penny – so be very careful trading them.

    And then you ignored this from today's chat?

    Yes, carefully, with tight stops below $1.65.

    But yes, I expect the normal holiday weekend pump job when this afternoon's dump is done.   

    Oil is a great example of why we keep moving our stops up in the Futures:

    Brent telegraphed this move by a mile.

    /NQ /MrM – AAPL is driving the bus today. 

    ATI/Taihu – Yeah, big move up for them.  Still, it's only on track $4.10 for the spread less 0.35 for the shorts is net $3.75 on the $5 spread so, if they hold $20 through Oct, you make another $1.25, which is 33% in 51 days.  Do you have better ideas for making 33% in 51 days?  If so – please tell us!  

    If you are looking to squeeze out more cash, you roll the short $17.50 puts (0.35) out to the 2019 $17.50 puts at $2.65 and put another $2,300 in your pocket without increasing your obligation (other than over time) at all.  

    MO/Yodi – I know, great stock, that's why owning it is our fallback position!  

    Window dressing/Rustle – Sure looks like it.


  46. Phil – Really good job describing the TEVA strategy.

    No doubt you are the master, but way too complicated for my feeble mind.  I'd much rather stop out and look for greener pastures.

    I would also add that by rolling the puts down and by buying 2 times the number calls and selling 3 times the number of puts, you are adding a lot  more risk to a  losing trade and to a stock that's still in a downtrend.  JMHO


  47. Phil,

    Do you have any long /CL contracts still?


  48. TEVA/Jabo – I feel you pain.. had a BCS that went worthless when dropped through 25..  but temping to try again down here. Are you with me?

    https://www.youtube.com/watch?v=-U3un8L7Csw


  49. Great discussion on the FU stocks.  The various perspectives are helpful.  Managing the emotional aspect (fear and greed) is one of the most difficult parts of the process as is finding a method that works for you. 


  50. I'm with you Scottmi!!!

    I understand Phil's strategy.

    He can give me grief about not legging in properly and being impatient.

    Maybe, he might even admit when his analysis was sloppy when those bargains drop over 50% right after his rec… but I doubt it--he is never wrong…

    I don't mind averaging down on good companies that will eventually recover.

    Unfortunately, my biggest losing positions are TEVA and FTR. (not to mention IMAX, LB, M, JO, and GE) -ouch!

    Watching my biggest positions hit 52 week lows every week is hard to get used to. 

    Hopefully, I will get used to it and will eat crow when these bargains actually do recover (I hope).


  51.  

     

    [re. just read ilene's interview of Jan Dash here. Very good! Read it.]


  52. TEVA/Jabo

    Haven't owned a share yet but getting closer to buying a partial position.  Reminds me when I bought my first shares of GILD at 66.  Happy with that average right now and have been reinvesting dividends.  I have to think at worst TEVA is 12 and in a year from now it has potential to be in low 20's, gladly would love to say I bought it 3 points off it's whatever year low.  Again, similar to GILD.  As long as they have earnings and drugs in the pipeline, not too worried about them going to 0.  They'd be bought out way before that.


  53. Risk/Albo – You have to understand the original intent.  We enter our trades with 1/4 positions so the real risk is that they DON'T get cheaper and we don't get a chance to fill our allocation.  In TEVAs case, we originally sold 10 2019 $45 puts for $4 ($4,000) along with 10 2019 $25/35 bull call spreads at $6,500 so net $2,500 on the position.  We bought back the short for a $2,310 profit for $2,890, so our net is now $9,390 and we rolled the short puts at $10 ($10,000) down to the $37.50 puts at $14,400 so now our net cash outlay dropped to just $4,990 and our obligation is to buy 1,500 shares of TEVA at $37.50 ($56,250), which is still just 1/2 of an allocation block – IF ASSIGNED.  

    As it stands, it's using a tiny fraction of our cash and a little margin we don't need.  

    So our next move  is to roll our 15 short $37.50 puts at $20 ($30,000) to 30 of the $25 puts at $9 ($27,000) so now we're out of pocket for $7,990 but we get to buy 3,000 shares of TEVA for $25 ($75,000) vs our original idea to buy 1,000 for $45 ($45,000) so the additional 2,000 shares of TEVA we're adding for just $30,000 ($15).  We also got more aggressive and spent $9,350 to roll our 10 2019 $25 calls down to 30 of the $17.50 calls because, now that the stock is 60% cheaper than where we started, we WANT to have a very aggressive long position.

    So net net, we are in 30 of the 2019 $17.50 calls for $17,340, which is about $5.78 each so our break-even is $23.28 but a bit higher as we have to clear the puts at $25.  If it does, in fact, turn out that TEVA is making $4/share and someone buys them out for 10x earnings ($40), we'll make $50,000.

    Meanwhile, we have 30 long $25s and 30 short puts and we could sell 20 Jan $17.50 calls for $1 right now but I want to wait to get $2.  Even if we just took $1 for 5 quarters while we wait, that's $10,000 or half our outlay back and our breakeven drops to $20.  

    And, of course, we're not going to ride them down to zero, we can always sell 2019 calls and use that money to roll the long calls lower or to longer strikes (allowing for more sales) or we can roll the short puts out to 2020 when they come out, at least to the $22.50s and probably down to the $20 puts and, even if the $20 puts pay us 20% less, we can roll to 40 of them for $80,000 obligated and we've given ourselves another 20% discount.  Do that 5 years in a row and you get to zero!  

    That's what I mean by they have to go BK for us to really lose and, meanwhile, we have the power to do a partial call sale and get back half the money we laid out in 5 quarters – IF WE WERE MORE BEARISH.

    You are looking at a game of chess and judging an individual move like it's a coin flip – without seeing that it's all part of a bigger, more complex game.  This strategy is not about individual wins and losses – they are all part of a long journey to creating a portfolio that is full of very cheap companies that just so happened to go through a rough period – which we took full advantage of.  

    Markets flying up on tax cut expectations (again).  

    /CL/Japar – Well I stopped out 4 at $46.50 on the way down (same lines as yesterday) but now back in 4 long at $46 and 2 long /RB just under $1.61, which already paid a quick $2,000!  

    Sloppy/Jabob – You just posted a link saying they are worth $66.  I'll be happy with $40!  My analysis isn't wrong the PRICE is wrong.  That's the difference.  Warren Buffet is 87 years old and for 60 years he's made hundreds of Billions of Dollars buying companies no one else wanted and, when they go down – he buys MORE – because he understands the value of companies and also understands that there are clueless investors who have no idea what a company is worth whose loyalty to a stock only lasts as long as it takes them to read the next negative analyst report or, even worse, until some squiggly line on a chart makes a "bad signal".  It doesn't do you any good to hold onto stocks if, like TEVA, you don't adjust the positions.  If you don't have margin or cash then you need to pick one or two you really believe in and roll those properly because NEEDING 100% gains to get even is ridiculous. 


  54. Look at GILD now…over $80!


  55. Trump calls for Sen McCaskill to be voted out of office if she doesn't back his tax cuts.  This is going to be ugly.  Imagine if Obama had gone around telling people to vote out Republicans who opposed him.  What would Fox have said then?


  56. OMG – This guy flat out lies in almost every other sentence!  What complete and utter BS he is selling to these people so he can give himself a massive tax cut.  


  57. I have adjusted TEVA..

    I hope I will not need it to go up 100%.

    It just keeps hitting new lows every day so it is incredibly frustrating.

    If our analysis isn't wrong and it is the price that is wrong, then where/what do you think it should be at/worth?


  58. Phil – Tax cuts in the wind, but probably won't happen.  Also read that keeping Harvey reconstruction going might make it easier to reach a debt ceiling agreement.  Very difficult to vote against that if a rider to that effect is attached.


  59. Phil,

    What do you think of the spread between /BZ and /CL? It should get narrower right? And I think it should go towards brent 


  60. Phil – You obviously have had a lot more winners than losers.  I think a big problem with the FU trades is people have been going in with a full position to start with, not just 1/4.  Hence the inordinate amount of time discussing them.  You've talked about position sizing, but perhaps it needs to be discussed more.


  61. Tax cuts / Phil – His fan will believe anything he says:

    http://www.motherjones.com/kevin-drum/2017/08/the-economy-is-rigged-against-the-rich/

    And what’s the best way to unrig the economy? To reduce corporate taxes and lower top marginal rates on rich people! That should help all those struggling white working class folks who voted for Trump.

    Donald Trump once said he could shoot someone on Fifth Avenue and his supporters would still love him. It looks like he’s about to put that to the test. If he can convince working-class voters that Paul Ryan’s tax plan will help them out, it means they’ll literally believe anything.

    I can't feel bad for people who don't want to take 5 minutes to try to understand that his proposal will not benefit them one bit!


  62. Position sizing / Albo – It's been one of the first thing I learned after being burned on too large a position. As with other thing, size does matter in investment. It's tough sometimes to limit yourself to a couple of contracts when it looks like a winner, but it's a portfolio saver.


  63. Harvey's Financial Market Effects

    I have no idea whether I'm talking out my butt here, but I thought I would float some thoughts. The last big payout the insurance industry had was Hurricane Katrina from Aug 2005. The insurance companies are going to have to liquidate their investments to meet payout obligations. It's seems like most of their funds for this type are in Corporate Bonds and in Equities. Can anyone shed any light on the time frame from claim to payout for house insurance? Any memories on the effect on markets from 2006-2008 when liquidations would have taken place? Anything of interest worth raising?


  64. And his enemies are convinced he's the devil. What else is new?


  65. TEVA/Jabob – What should a company that makes $4/share be worth?  Even if this and that goes wrong and you cut it in half – what do you reasonable pay for $2/share in earnings?  15x seems reasonable, right?

    Debt ceiling/Albo – Don't underestimate how greedy the Republicans can get.  They may put some deal-breaking anti-abortion thing in there and force the Dems to vote against it so they can point fingers.  These are truly sick, twisted individuals with zero morals we're dealing with!  

    /BZ/Japar – I would think /BZ should come down and /CL should go up a bit and they meet around a $3 spread.  

    Discussed more/Albo – There's I guess I can say to everyone "Have you actually read our strategy section?"  Seems silly when dealing with adults but maybe we need to.

    Taxes/StJ – The most outrageous thing is the way Trump paints those Corporations who hide taxes overseas – DEPRIVING THE US OF REVENUES – as if they are heroes, who took a moral stand and now he will reward them by letting them bring all that money ($2Tn hidden assets) into the country free of penalties.  Just like when Bush did the same thing, all it does is encourage the next round of corporations to move even more money to tax havens.  It makes the companies who didn't do it look like suckers to their boards…

    Insurance/Enfil – Those guys are usually swimming in cash.  PRU, for example, has $14Bn in cash and $439Bn in investments and $304Bn in "other assets".  That's against $23Bn in debt and $696Bn of potential "liabilities" from policies.  As the policies wind down, the liabilities are released and that's how they book their profits.  Texas may be big but let's assume $40Bn in damages and PRU very doubfully would have more than a 10% market share so $4Bn is a real worst case and easily handled.  


  66. STJ – Amen to that.  A good example is my excessively large QUIK position. 8-)


  67. Oh, and probably more than half the insurance damage is paid for by the Government's flood fund so really doesn't leave much for the insurance companies to fret over.  


  68. Mkuc, he's  not the devil, he's  just an awful human being who is unqualified to be the most powerful person in the wold.


  69. I can agree with that :)


  70. Phil I didn't miss those, but it dropped so hard and fast that I was already in the hole and figured it wouldn't keep going like it did. Looks like it may turn out ok since I doubled near the bottom for a nice profit now. Just glad I didn't have to wait all night for it to bounce back over 1.63


  71. Flood / Phil – From what I understand 80% of the people don't have any flood insurance at all and will be out of pocket for the damage. Private insurances don't cover this type of flood anyway and most people don't bother with the federal program. The Feds will offer low cost loans but that doesn't help people who already financially under water, not mentioning physically as well. It's going to be a tough time there!



  72. Repatriation / Phil – And when Bush did it, no jobs were created (or hardly any). The repatriated money was paid out as dividends so going to the top 1%. But they need it now because they have been victimized by 8 years of socialism! 


  73. Futures/Craigs – Well you're getting a better attitude about it, that's for sure!  I still have my 2 long /RBs open.  I think I'm being greedy but I'll be less pissed blowing my $2,200 win than if it shoots up 10 cents into the weekend and I don't get $8,000 more!   After all, that was my original premise.  

    Flood/StJ – Actually, you can't get a mortgage without buying flood insurance if your property is in a flood zone.  The big issue is properties that were not considered at risk (if the floodwaters have not hit there in 100 years, there is no insurance requirement) who got hit by the storm – they get massively screwed but so do the people who have to deal with Government insurance programs that aren't even funded properly.   


  74. Teva Pharma receives FDA approval for AUSTEDO tablets for the treatment of tardive dyskinesia in adults

    Font size: A | A | A

     

    3:54 PM ET 8/30/17 | Briefing.com

    AUSTEDO was previously approved for the treatment of chorea associated with Huntington's disease in April 2017.


  75. BDC & TBT = my big mistake (in 2011). I needed 100% to "Get back." It took years.

    We all have them.


  76. Dickens understood the differences in rhetoric when newspapers introduced thrice daily editions..he once said..It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.


  77. We can choose mutuality of propose and competitiveness in enterprise..or revert to Dickensian desiderata.


  78. Flood zone / Phil – We probably need to reconsider the extent of flood zone with climate change. Heck I understand that Bangladesh is now simply a massive flood zone. 

    As far as the underfunded federal program, it's kind of ironic that most Texas lawmakers probably voted against funding these programs anyway. But now, deficits won't matter…

    Except for poor kids of course:

    http://talkingpointsmemo.com/livewire/chip-congress-republicans

    According to the Wall Street Journal, Republicans may attempt to use the CHIP deadline as a vehicle to revive their effort to chip away at the Affordable Care Act, and could try to attach amendments to the bill to reauthorize its funding.


  79. CL – WTF?!  Take about Hacksaw Ridge… been following Phil and was ready to finally get to even at 2 long at 45.92 if it went to 46.5  but noooooo, out of the gate in the evening at it drops to a new week low!  

    4 long 45.8.  will reduce 2 at 46.  And I keep looking at RB — why I did not think about shortages?? grrrr


  80. FU /CL   Damn it….   i am Long to many contracts to say.  


  81. RB above 1.67 now….crazy !!!


  82. Wheee, nice break on /RB, up $5,400 pays for the oil losses and more!  

    You know what's really crazy?  How I can publicly state that we're playing /RB long at $1.63 in the morning and it makes two nice payoffs off that line in one day.  Imagine how much money this is costing someone in order to jam prices up into the weekend.  

    Insurance/StJ – That's about right, when you have a rare flood like that, there's simply no coverage, which is another floor in the flood insurance program.  

    Dickens/Streth – Sometimes you can tell he got paid by the word!  

    /CL/Latch – I hope you hung in.  

    Here's my Nasdaq spot today:

     

    Donald Trump signed an executive order just days before Hurricane Harvey that scrapped many of the flood protections introduced by Barack Obama.

    Harvey has caused huge damage in Texas as 30 inches of rain in less than 48 hours resulted in massive flooding. 

    The current US President, however, has abolished a number of flood standards in an attempt to get infrastructure projects approved more quickly. The Federal Flood Risk Management Standard is among those to have been rolled back.

    In 2015, Mr Obama introduced measures that made it harder to build roads, bridges and other infrastructure in areas that were susceptible to flooding. Plans for such projects would legally have to take into account the impact of climate change and be built to withstand future changes.


  83. Flooding from Tropical Storm and Hurricane Harvey has likely damaged a half-million vehicles in Texas, according to data compiled by Solera Holdings, a tech company that helps insurance companies process car insurance claims.


  84. note from North Texas:   evening news tonight just reported to expect gasoline shortages for this weekend.

    A QT chain spokesman said about half of their 80 area stores will not have fuel for the weekend.


  85. phil – CL  hung in sort of…I got cold feet on the fake mini dip,  Now have 3 long  -- need 46.5 to BE. Would like a taste of that RB.  It's a buckin horse for sure.


  86. stock – shortage.   Here in Houston, No lines at the stations and everyone I saw had a tanker filling them.. somebody's gotta gas.


  87. This shows that some gas stations in the Houston area are out of gas:
    http://tracker.gasbuddy.com/


  88. Phil TEVA I must say your rolling explanation is a bit hard to follow, the actual dollar outcome. Even in principal the doubling down of puts, buying back the going to worthless leap calls and increasing on the long leap calls is quite understandable.

    Just the numbers are very confusing. I cannot understand why one would sell a 45 put against a 25/35 BCS. Normally your putter should have been in the range of 25 highest 30 but not 45. Even at 45 the credit of the put did not liquidated the cost of the BCS.

    I have no plays in this stock but was original negative on this play, commented at the time. Looking back at it now, you can say I am the Monday morning quarter back!

    But the stock went during one year from 52$ to 15$ and counting, to me a very sick puppy. I can only look back at stocks like CLF in my books Jan 10 @ 63$ now 8.80 RIG Jun 10 49$ now 8.10.

    Even these stocks are very different due to circumstances, but it took them 7 years to get to where they are now. TEVA has just about managed the same performance in one year.

    I consider the stock as a poker hand and in this spirit I see still some members eager to burn their fingers.

    So just for the hell of it for a new start, begin with a 2 option play only and only with a two option play as I want to sell ½ shorter term options against this puppy to reduce cost.

    Buy the Jan 19 12.5/17.5 BCS @ 2.33 and sell the 12.5 Jan19 put for 1.67 all two off only!!! Your net cost here would be 132.00. To reduce the cost further you can sell an Oct 17 17.5 call @ .36.

    So net net 96.00

    Max profit on a 2 opt play, if stock would go up to 17.50 by Jan19 824.00. If stock stays as is 416.00

    Your lower protection stops at 13.38. Total cost at bankrupt 2676.00

    Now if this stock would drop another 2.50 from here I would cut my lines and run.



  89. NNN I am extending already half the option value of my Sept. 40 put, possible going worthless, to Mar 18 40 put credit 2.00. Selling the other half put value after Sept.15 together with a new caller, matching my stock holding.

    Even that I am holding the stock at 30$ I feel a new play could be still entered by buying the stock @ 41.10

    and sell the 40/40 Mar straddle for 4.40. giving you a combined return of 2.02% per month. Regretful the option steps increase here by 5 pts. so I feel going for the 45 caller reduces the premium by more than 1.80. So I would go for the 40 caller just 14 cents ITM.


  90. NSA storage need more than ever now.. I am extending my present holdings.

    Buy stock @ 20.00 and sell the 20/22.5 April strangle for 2.60. return combined 1.92% per month.

    If you are more agressive you can sell the Apr. 22.5/22.5 straddle for 3.75, increasing your return to 2.60% per month.



  91. SGYP here another sick pup in my portfolio. I am holding the Jan18 3.5/7 BCS cost 1.35 holding 10 opt.

    Sold 6 Jan 18 4 puts @ 1.10 . My net cost runs to 690.00.

    At present I decided to roll the long call to April 18 2.5 call for a cost of .55 cents and selling at this stage 5 only April 4 calls for .45 cents. Further I roll my Jan18 4 puts to April 3 puts for a cost of .55 cents and selling a further 6 x 3 puts for .75 cents.

    So putting all in $ numbers

    1. Roll cost 550.00

    2. sale credit 225.00

    3. put roll cost 330.00

    4. sale of further 6 puts 450.00

    So my additional cost is 205.00 plus the initial cost 690.00 equals 895.00.

    The spread is now 2.5/4 with 10 option will be optimal  1500.00

    My option is to sell a further 5 x 4 April 18 callers for .40 to .45 cents or 225.00.

    Conservative one could liquidate the Jan 18 7 call. At present .08 to .10 cents or 100.00 in my case.

    I just keep an eye on it as I do not believe this pup will make it to 7. Obviously you can roll the complete operation to Jan 19. Might look better. But if this play does not hold April, why wait till Jan 19 to prolong the suffering.

    The above I place as an example for adjusting of sick pups.


  92. Avdill,

    Batteries In my opinion, the complete idea for powering cars with batteries is just a pipe dream.

    In respect of real cost to produce and charge a battery up to the enormous time to charge a battery, is to me the same story as “the kings new cloth”.

    Especially here in Germany, the big story about CO2 and diesel has shown that in the far future we cannot do away with the present type of combustion engine.

    In my opinion the only way it is using Hydrogen engines. Fill up your tank with hydrogen and drive away, same as filling up with gasoline. We just have to write off the oil producers.


  93. Bulls- gas shortage. I looked at my areas and most say 'unknown' status since Friday Aug 25 The three I actually saw had gas. 


  94. We drove around mid town yesterday evening , inside 610 loop. Lotsa folks out, having dinner, walking Buffalo Bayou, which is significantly down from the horror picture. Not one gas line or even crowded station. Lots of pumping out of basements and garages. Lots of flood damage repair already started. 


  95. Yodi,  agree, after missing a bunch $$$ of money in A123, Axion Power, Ballard and Valence  I have the same conviction  about electric cars, amazingly Mr. Musk has been successful where others and chemistry shows it´s not viable.

    I don´t know if the moment to short TSLA is now, but I´m sure that will be one of the best shorts in history.

    BTW, going up during Sept. to France in the RV, are you moving?.


  96. Good morning!  

    Just got stopped out of oil longs at $46.25, still not bad for a morning pop.

    /RB still hanging at $1.67.

    Futures are up, /YM just hit 21,947 and I just added 2 more so now 8 short @ at 21,903

    I figure between tax cuts and window dressing, if this is all they can do – it's not enough (my AAPL a day theory).  

    Dollar with a nice pop (taking that money and running) and I told you so on /NKD, right?  That's why you have to know your currency relationships.  Taking the money on that too (all longs off the table). 

    August 30th, 2017 at 5:43 am | (Unlocked) | Permalink 

    /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.

    That's why my retirement plan is to live in Europe, wake up, have breakfast, read the papers and then make a couple of futures trades to pay my bills and then go out and enjoy the rest of my day.  In the Futures, you can make all the money you need between 3am and 10:30, EST.  Sleepy markets are slow to react to news – even when it's very obvious.  

    Gas shortages/Stock – Well the trucks can't deliver to some places, that's the main reason for the shortages.  Also, can't imagine a whole lot of demand with 500,000 cars destroyed in a city of 2.5M people – that's gotta be 1/3 of all cars!   This is crapping out a holiday weekend – terrible for retailers in Houston.  

    Useful link, Bulls!  Unfortunately , 90% are listed unknown at the moment.  Hopefully, people will fill it in.  


  97. Phil,

    Are you still expecting a run up in /CL and /RB into the long weekend? What are your targets?