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Top Trades Tuesday – Reviewing our 1st Half Trades of 2017

Image result for top trade ideas

We're currently on a trading break.

We went to CASH!!! two weeks ago (12/5) and we're going to start January 2nd with 4 brand new Member Portfolios and sure, we've been finding a few new trade ideas over the past couple of weeks – just not for our official portfolios.   It will be nice to have a clean start in 2018, 3 portfolios using 3 trading styles with $100,000 (Short-Term, Butterfly and Option Opportunity) and the $500,000 Long-Term Portfolio, which we cashed in at just under $2M after 4 years of trading (Nov, 2013). 

We also have Top Trade Alerts at PSW – those are our favorite trade ideas from our Live Member Chat Room each week and they are sent out by Email and Text Alert to our Members as well.  Our last Review, published at the end of September, covered the first half of the year and, through May 31st, we had put out 27 Top Trade Alerts (about one a week) and 21 (77%) had already been winners vs 6 losers for a $43,850 profit.  That, of course, includes hedges, which are not supposed to win – so a pretty good collection of trade ideas!  

In fact, the losers are the main reason our Members love the Top Trade reviews as we get a second chance to look at companies which we considered a good value, that got even cheaper a few months later.  In the September Review, we had 3 losing trade ideas in March, April and May so, before we get into the June trades, let's look at what we did with those losers.  

Our Monday, March 20th short on Tesla (TLSA) failed us but we rolled it into another short and got our win in May, so not really a loser but the original trade was.  More valuable though, was our discussion of how to play and we'll look at those two new ideas from the September 30th Review:

When a trade like that moves against you, you can roll the short calls.  For instance, TSLA is now $340 and the Oct $300 calls are $43.50 and the Jan $340 calls are $31.20 so we could roll 3 of those ($13,050) to 4 of the short Jan $340s ($12,480) near even and, if we can roll up $40 every quarter – we actually have a massive cushion on the short calls if we stick with them – as we did in the STP (though more aggressively).  Similarly you can roll the long puts to higher strikes and longer months when they are not working – if you are willing to invest in the premise that they will work – EVENTUALLY.

  

As you can see on the chart, TSLA fell apart nicely in October but not soon enough to avoid the need to roll but the 4 short Jan $340 calls, which were $31.20 per 100 option contract ($12,480) are finally turning into winners, currently at $13.25, which is $5,300 for a gain of $7,180 (57%) and, of course, that's much worse than our 12/5 cash out, when TSLA was $40 lower.  TSLA will probably be one of our first shorts of 2018 – but, from our reviews, we know it's certainly not for the feint of heart – but at least we know how to handle them when they go against us!  

Another great reason to read our reviews is to get an idea of what kind of trades are too risky for you.  We have a lot of high net-worth traders, many of whom are fund managers so some of our trades are aggressive and this one, at one point, was down $16,280 before turning around.  The margin requirements on naked short calls are also high, especially on a volatile stock like TSLA, which is why we only play with a few contracts at a time and we tend not to double down.

See, this is how our Top Trade Reviews work, we analyze the trades, figure out what went right or wrong and, hopefully, it makes us a little wiser the next time a similar situation comes up!

Wednesday, March 29th gave us our 2nd loser from the September Review and that was on Cheasapeake Energy (CHK), where I said:

CHK has dropped about $1 since our entry and BEING THE HOUSE can't save you from everything.  Still, the damage is mitigated somewhat and, at the moment, the short puts have bumped up to $1.85 ($3,700) while the spread is now 0.70 ($1,400) for net -$2,400 which is a loss of $3,000 (500%) including our initial $600 cost.  CHK is at $4.30 and here's a good example of a spread that should be rolled.  2020 options are out so we can:

  • Roll 20 2019 $5 puts at $1.85 ($3,700) to 30 2020 $4 puts at $1.25 ($3,750) 
  • Roll 20 2019 $5 calls at 0.85 ($1,700) to 20 2020 $2.50 calls at $2.40 ($4,800) 
  • Sell 20 2020 $5.50 calls for $1.15 ($2,300) 

That exchange costs $750, raising the net cost of the spread to $1,350 but now it's a $2.50/$5.50 spread that will pay $6,000 if CHK is simply over $5.50 in Jan 2020 – still a nice gain, albeit over more time.  Meanwile, we still have the short $10 calls, now 0.15 and we could buy them back for $300 but better to put an 0.25 stop on them as they will likely expire worthless and save us the money. 

Getting a good trade idea is only the first step in the process to being a successful investor – you must also learn how to manage those trades over time.  That's what we try to teach our Members in the Live Chat Room at Philstockworld, where we discuss adjustments like these every day.  We have an Education and Strategy section that you also should read, so that you can apply our lessons to these Top Trade Ideas. 

CHK has gone even lower since September and the new 2020 $2.50 ($1.85)/5.50 (0.75) bull call spread is $1.10 ($2,200) while the 30 short 2020 $4 puts are $1.35 ($4,050) for net -$1,850 so this trade has lost $2,350 now – a small improvement from our $3,000 loss in September and still good for a new trade as you would now start with an $1,850 credit and $7,850 (424%) upside potential if CHK does get back to $5.50 – which we still expect.  So, to be clear, as a new trade on CHK, we like (and you don't need 30 short puts – we just did that because we got in trouble):

  • Sell 10 CHK 2020 $4 puts for $1.35 ($1,350)
  • Buy 20 CHK 2020 $2.50 calls for $1.85 ($3,700)
  • Sell 20 CHK 2020 $5.50 calls for 0.75 ($1,500) 

So, as a new trade, that's net $850 on the $6,000 spread for an upside potential of $5,150 (605%) if CHK is over $5.50 in two years.  The worst-case scenario is that 1,000 shares are assigned to you at $4 + the $850 you spend on the spread (if you let it go worthless) and that's net $4.85 per share, so it's an aggressive entry but we're starting out $2,400 in the money at $3.70 and the margin requirement on the puts is just $417, so it's a very margin-efficient way to make $5,150.

Our other losing play from Q2 of 2017 was on IMAX (IMAX), from a trade we initiated on Friday, April 28th, where we had taken a small position in the Option Opportunity Portfolio, selling 5 Dec $29 puts for $2 ($1,000) "and see how they go before adding a bull call spread."  As you can see from the chart, it went way lower, but that's actually what we wanted and it was time to add the spread, so I said:

Imax took a tumble and 5 Dec $29 puts are now $6.50 ($3,250) for a $2,250 (225%) loss.  Our plan was to roll and double down and the March $24 puts are $3 ($6,000) so, for example we go from 5 short Dec $29 puts to 10 short March $24 puts and take $250 of our original $1,000 out of pocket.  That puts us in the short $24 puts for net $750 and, as there are now 10 of them, it's 0.75 per contract and our break-even is $23.25.  

In our Member Chat Room, we added a bull call spread on the dip and we decided to drop to the March $22 puts, but that was back on 8/21, when we didn't know for sure if we'd recover.  Now we're more confident and the $24 puts seem fine.  The spread was 20 March $15/20 bull call spreads at $4.50/1.80 at the time ($5,400) and now they are $8,100 so I would not chase but, as a new spread, adding 20 March $22 ($2.80)/$26 ($1.15) bull call spreads for $1.65 ($3,300) is the way I would go as it's not too ambitious but still pays up to $8,000 at $26.

So the new set-up was 10 short IMAX March $24 puts (net $750 credit) and 20 of the March $22/26 bull call spreads at net $1.65 ($3,300) for net/net $2,550 on the $8,000 spread.  Fortunately, IMAX is already over $24 and we're on track for the full $8,000 return and a $5,450 (213%) profit and, at the moment, the $24 puts are $1.30 ($1,300) and the $22/26 spreads are $2.45 ($4,900) for net $3,600 so already up $1,050 (41%) but still a nice $5,400 left to gain from here so great for a new trade.

That's how 2 of our 3 losing trades have already become winning trades.  Learning to adjust your spreads is the key to long-term options trading.  Now, let's take a look at our 2nd half trade ideas and see if we can find some more that are still good for new entries (ie, "losers"):

Tuesday, June 6th, we had two trade ideas for our Members, the first was for Barrick Gold (ABX) and we reviewed our thoughts on gold and concluded:

does make ABX a bit silly down at $16, doesn't it?  In the LTP we have the Jan $12/20 bull call spread at $3.15 (25) and I say we buy back the short Jan $20s (0.62) and leave the $12s but add 50 2019 $13s at $4.75 ($23,750) and sell 50 2019 $20s for $1.80 ($9,000) and sell 25 2019 $15 puts for $2 ($5,000) for net $9,750 on the $35,000 spread with $25,250 (258%) upside potential at $20 not including the fact that we're already up a few thousand on the original spread.  

LOL, that's really more of an adjustment to one that was in progress and NOT a winner as ABX has moved lower since, now $14.32.  The new part of the trade was 50 of the 2019 $13/20 bull call spreads at $2.95 ($14,750) and 25 short 2019 $15 puts at $2 ($5,000) for net $9,750, so we'll focus on that.  The 2019 $15 puts are now $1.95 ($4,875) and the $13/20 bull call spread is $2.20 ($11,000) so, surprisingly, this one's a loser at $6,125, down $3,625 (37%) and fantastic for a new trade as the potential at $20 is $35,000 off that net $6,125 entry so that's $28,875 (471%) upside potential in 12 months.  That one is definitely going in the new portfolios! 

Our other trade idea from June 6th was for DineEquity, who had taken a harsh fall.  My comment was:

DIN is in a tricky space given the declining traffic issues but mostly IHOP and AppleBees is pretty solid and the 50% sell-off is a bit silly and they do have options so I like selling the Dec $45 puts for $4.30, which nets you in at $40.70 if they go lower or pays way more than the $3.88 dividend if they don't.  Let's sell 10 of those in the LTP to keep an eye on them.

Keep in mind that was June 6th, so it was a bumpy ride but we got there and the Dec $45 puts expired worthless and made for a 100% gain ($4,300) in 6 months – simply for promising to buy 1,000 shares for net $41.30 back in June.

Tues, June 13th was a good lesson but a bad trade.  I'll let the conversation speak for itself:

We wanted to discuss leverage today so let's talk about how we can limit our risk while still having good upside with a speculative play on the Pharmacy play, Zynerba Pharmaceuticals (ZYNE).  

ZYNE makes transdermal delivery systems (skin patches) for cannaboid therapeutics (pot) to help treat epilepsy and they are conducting a Phase II trial that, if it goes well in August, could lead to explosive growth.  Or it could fail and they die – so it's the kind of play where we want to limit our losses.  

Rather than buying the stock for $18, we can instead go past our expected August event and buy a bull call spread that limits our downside risk:

  • Buy 4 ZYNE Nov $15 calls for $7.50 ($3,000) 
  • Sell 4 ZYNE Nov $22.50 calls for $5 ($2,000) 

That puts us in the $3,000 spread for net $1,000 and our loss is limited to the $1,000 we put in yet our upside potential is $2,000 (200%) at $22.50.  In order to make $2,000 at $22.50 you would need approximately 400 shares of stock for $7,200 and limiting your loss to $1,000 would mean you would have to set a stop at $15.50 and phama stocks are very volatile.

Using the spread does cap your gains but it limits your losses and gives you great leverage (7:1 in this case).  Not only that but, because you are buying 4 $15 calls for $1,000 ($2.50 each), your break-even is $17.50, which is 0.50 below the current price – giving you a discount to buying the stock right from the start.  

As you can see, the stock went the other way and collapsed, so call it a $1,000 (100%) loss for someone who didn't adjust it (it was actually easy to save).  The real lesson here is that, had the tradee been successful, it could have made 200% ($2,000), so there was plenty of upside but, rather than buying 400 shares for $18 ($7,200) and seeing them collapse to $6 ($2,400) and losing $4,800 – our loss capped out at just $1,000 and we only tied up $1,000 while the other $6,200 could have gone into more sensible trades.  THAT is how you speculate – SAFELY!  

Friday, June 16th, we decided it was time to buy Target (TGT) as they dipped on disappointing earnings – that is exactly what we define as an "Options Opportunity":

TGT is earning about $4 a share and you can buy them for $50, that's what I care about. I'm a fundamental investor and I like to buy stocks that make me a return on my investment as a business. If they are doing that, the stock price will eventually follow.

For their sector, figure 15x earnings ($60) would be a reasonable price and, even if you assume AMZN really hurts them for 10% (unlikely) then $54 is still better than we are now so let's add them to the OOP:

  • Sell 5 TGT 2019 $45 puts for $4.20 ($2,100)
  • Buy 7 TGT 2019 $40 calls for $12.50 ($8,750) 
  • Sell 7 TGT 2019 $52.50 calls for $5 ($3,500)

That's net $3,150 on the $8,750 spread that pays $5,600 (177%) and all TGT has to do is hold $52.50 in to Jan 2019.

That one was easy money and we're miles over our target on Target already and the short 2019 $45 puts are down to $1.50 ($750) and the $40/52.50 spread is already $8.32 ($5,824) out of a $12.50 potential for net $5,074, which is up $1,924 (61%) already but still $3,676 left to gain, which is 72% on $5,074 so, once again, even the leftover scraps from our PSW Trade Ideas make more money than the best picks from other services!  

Wednesday, June 21st, our trade idea was for the Biotech Ultra ETF (LABU), which we love to play when they are low in the channel.  We had discussed it in that afternoon's Live Trading Webinar:

Saw a good LABU (3x Biotech) idea in the Webinar for the STP:

  • Sell 5 LABU Dec $45 puts for $5 ($2,500) 
  • Buy 10 LABU Dec $55 calls for $19 ($19,000) 
  • Sell 10 LABU Dec $70 calls for $12 ($12,000)

That's net $4,500 on the $15,000 spread that's $11 ($11,000) in the money with $11,500 (255%) upside potential at $70.  

As you can see, LABU is right at our $70 goail and paid us in full last Friday, when they closed at $69.95 (OK, we were off by 0.05).  That paid $14.95 ($14,950) on the spread for a $10,450 (232%) gain in just 6 months!  

Friday, June 23rd, we had two trade ideas and the first one was a rare, straight stock pick on QuickLogic:

QUIK/Albo – Starting to move, hopefully it continues.   Too bad the options are so thin but, at $1.36, may as well play the stock straight-up.

At $1.68, that one is simply up 0.32 or 23.5%.  

Too bad we didn't stop there but I couldn't resist GE as it began it's long fall (hopefully done now):

GE Time.  Don't know why it's so cheap, don't really care.  It's friggin' GE!   I'm not even to discuss why buying GE with their $1 (0.96) dividend for $27.50 is a good idea as a stock you will proudly give to your Grandchildren one day.  You either know that's true or you don't.  

For the LTP:  

  • Sell 10 GE 2019 $28 puts for $3 ($3,000) 
  • Buy 25 GE 2019 $25 calls for $3.85 ($9,625) 
  • Sell 25 GE 2019 $30 calls for $1.40 ($3,500)

That's net $3,125 on the $12,500 spread and we would be THRILLED to have 1,000 shares of GE assigned to us so we could DD and have 2,000 shares to collect dividends on on the mid-$20s ($50,000ish), which would pay us $2,000 a year while we sell more puts and calls.

At $27.60 now, you can sell the 2019 $25 calls for $3.85 and that drops the net to $23.75 so let's imagine things go badly and GE falls to $20 and we're forced to own 1,000 at $28 plus the $3,125 loss so $31.25 but GE is at $20 so we DD and we're at $25.58 avg on 2,000 shares and we sell 20 2021 calls for $2 and now our basis is $23 and we'll collect $2 in dividend and another $2 if we're called away for $4 (17%) profit despite GE dropping another 20% from here.  That's the kind of play I can feel very comfortable with!  

Those 2019 $28 puts are now $10.30 ($10,300) and the $25/30 bull call spread is 0.17 ($425).  We did, in fact flip to owning the stock as it dipped but, given this net -$9,875 spread that cost us $3,125 for a net loss of $13,000 (416%), the way I would go with GE is to sell 20 of the 2020 $20 puts for $3.75 ($7,500) and buy 40 of the 2020 $15 ($4.20)/$22 ($1.30) bull call spreads for $2.90 ($11,600) and that's net $4,100 more into the spread so net $17,100 and the best we'll do is get $28,000 back if GE hits $22 by Jan 2020.  

Of course, as a new trade, I love it as the upside potential is $23,900 (582%) and we're $11,000 in the money to start at $17.75 but, for our poor Top Traders, getting $10,900 back on $17,100 (63.7%) over 18 months is considered a trade that went badly for us.

Our final Top Trade Ideas for the first half were on Tuesday, June 27th, where I reiterated GE and TGT and we added 2 more:

FNSR has missed out on most of the tech rally after disappointing earnings in March (through 1/30), where they missed by 4.8%  but still made 0.59 and still on track to easily make $2 for the year, which is a p/e of 13.5 for a company that does fiber-optics and 3D sensors (for self-driving cars).  Well worth a long-term investment though they may get cheaper in a tech crash.

In the LTP, our allocation blocks are $50,000 so no worries selling 10 2019 $25 puts for $4.80 ($4,800), which would net us in at $20.20 ($20,200) as an initial entry.  We'll also play 20 of the 2019 $23 ($9.20)/30 ($5.90) bull call spreads at $3.30 ($6,600) and that will make the net of the whole $14,000 spread $1,800 with $12,200 (677%) upside potential.  

In the LTP, we actually added a lot to FNSR on the dip to $18 but this trade, as it stands now, is not good with the 2019 $25 puts at $6 ($6,000) and the $23/30 bull call spread at $1.90 ($3,800) for net -$2,200 plus the $1,800 we put into it is down $4,000 (222%).  That makes it great as a new trade with a $4,000 credit and a $14,000 potential return and we do still like them BUT, as a new trade, I'd go 2020 with the following:

  • Sell 10 FNSR 2020 $20 puts for $4.60 ($4,600) 
  • Buy 20 FNSR 2020 $17 calls for $8.40 ($16,800) 
  • Sell 20 FNSR 2020 $25 calls for $5 ($10,000)

This way, we're in the $16,000 spread for net $2,200 with $13,800 (627%) upside potential and that one is certainly going to be in our new portfolios as well.   See – this is why we love our reviews – they give us great new trade ideas!  

Our final Top Trade Idea for the first half of 2017 was, fortunately, a winner – as we didn't have a great June.  It was for Cisco Systems (CSCO):

CSCO is another long-time favorite we don't happen to own at the moment.  I've given up on $30 and again we have an attractive $1.16 (3.6%) dividend that would be nice to add to the LTP but, in this case, I'm going to do it like the above OOP play and we can sell high puts aggressively:

  • Sell 10 CSCO 2019 $32 puts for $3.80 ($3,800) 
  • Buy 20 CSCO 2019 $28 calls for $5.30 ($10,600)
  • Sell 20 CSCO 2019 $35 calls for $1.85 ($3,700) 

That's net $3,100 on the $14,000 spread with $10,900 (351%) upside potential at $35 and our worst-case is owning 1,000 shares for net $35.10 – we can certainly live with that after we double down, sell calls and start collecting our dividends, right?  

CSCO went flying and is way over our goal and, already, the short 2019 $32 puts are down to $1.15 ($1,150) and the $28/35 bull call spread is at net $5.65 ($11,300) for net $10,150 and that's up $7,050 (227%) already but still another $3,850 left to gain over the next 12 months and that's 54.6% up from $7,050 if you start here – not terrible.  One could argue that this is now a much safer trade too but I'm glad we cashed it in as we have PLENTY of ways to make 200-500% on our CASH!!! – so why tie it up to make 5% a month?

Overall, we had 6 winners and 4 losers in June and that's only 60% winners, which brings our average down for the first half to 28 and 10 (73.6%) – not counting the losers that turned into winners, of course.  It's the losers we love to look at – that's where the bigger opportunities are and, since we are Fundamental Investors – it's rare that we see a losing trade as anything other than an opportunity to buy more stock and options for even less money.  

From a CASH!!! standpoint, we netted positive $2,099 but it's better than losing and brings our first half total up to $45,949 in profits on 38 trade ideas.  We already have a Watch List for 2018 and we'll be adding some of these trade ideas to that but we'll be very cautious with our new portfolios until we see some of those Q4 earnings reports later in January and get some 2018 guidance under what we assume will be a new tax code (see yesterday's post for my thoughts on that).  

We're hoping for a nice market correction to give us some good entries but hope is not a valid investing strategy – so we study and review our past trades – to make sure we are ready and able to take advantage of the next opportunity that comes along.

 


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  1. Good Morning.



  2. You have to think that there will be a political price for the current madness – even the GOP base doesn't like these tax cuts, net neutrality is very popular as well and Trump's approval is approaching 30! Firing Mueller might ignite the powder keg!


  3. Phil/CBI

    Got a play for this still?


  4. CBI merger with McDermott 

    I have CBI position with J 19 options and am concerned that the options will be stranded with little activity as has happened with other mergers. Any idea on this? I'm thinking I should close the position.

    Per the terms of the deal, McDermott’s shareholders will own 53% of the new, combined company, while Chicago Bridge & Iron shareholders would own the remainder. The shareholders would receive 2.47 McDermott shares for each Chicago Bridge & Iron share owned, or 0.82407 shares if McDermott initiates a planned three-to-one reverse stock split prior to the conclusion of the deal.


  5. stjean – The upcoming 'firing' of Mueller would please that 30%…..


  6. Phil / Navistar

    It appears that they had an outstanding result this quarter. Would you recommend any trades at this point or should wait ?

    Thanks as always

    Pat


  7. Good morning!  

    Not up today – that's strange.  I still have my 4 /ES shorts – hopefully today is the day.  

    Madness/StJ – That 30% is loyal to the last man though. 

    CBI/Baron – Well I think this semi-takeover proves that they are at a good bottom so the play I'd make is:

    • Sell 10 CBI 2020 $17.50 puts for $4.80 ($4,800) 
    • Buy 20 CBI 2019 $12.50 calls for $6.00 ($12,000)
    • Sell 20 CBI 2019 $20 calls for $2.20 ($4,400) 

    That's net $2,800 on the $15,000 spread so it's got $12,200 upside potential at $20 (435%) but, even at $18 it pays $11,000 for a $8,200 (292%) profit and, while you wait, you can sell 10 April $17.50 calls for $1.60 to get $1,600 back and you're still double covered up to $20 ($5,000 headroom).

    Keep in mind though, the options will split an be difficult to trade so you'll be kind of stuck just waiting until they expire to see what you get.   That's very bad if things turn ugly.  I would just sell the puts.  

    CBI/TX – Well MDR is $7 so you're getting $17.29 and you still own (somehow) 47% of CBI.  It will be strange to see how they work that all out.

    NAV/Pat – Outstanding?  They made $37M after losing $176M in the previous 3 quarters.  The market cap is $4.5Bn so they need to make over $50M/qtr just to get to the low 20s in p/e and revenues are DOWN year/year, not up.  They are not in the least low in their channel and, long-term, I'd be very concerned about electric trucks damaging their business.  

    So not one I'd be getting excited about….


  8. CBI – we know what they are buying with their tax savings – more shares – announced a 45M shares buyback… increasing total buyback to 375M  (out of 565M total) …. this is an 85+ dollar stock sitting here…. starting to get noticed


  9. ESRX ( not CBI as above mind fart above) – we know what they are buying with their tax savings – more shares – announced a 45M shares buyback… increasing total buyback to 375M  (out of 565M total) …. this is an 85+ dollar stock sitting here…. starting to get noticed


  10. Public opposition to tax bill grows as vote approaches





  11. UPS just pre-ordered 125 Tesla Semis


  12. Heat, Humidity, And Heart Disease Could Be A Deadly Mix








  13. Republicans are about to get a big win on taxes. But at what cost?


  14. KODK – One of my dumpster dives (from $3.10), showing some good action today, up 10%.  Would think it should bounce further after the first of the year, once we're out of tax selling season.


  15. CBI/Batman – I was trying to get my head around that.  ESRX makes more sense but still a huge number.  They've totally taken off:

    • Redbook Chain Store Sales+4.4% Y/Y vs. +3.3% last week.
    • Month-to-date chain store sales +3.6%.
    • Redbook expects sales to be up 4.5% for the crucial holiday month.
    • ETFs: PBJIYK,
    • Tokyo Electric (OTCPK:TKECF) says Cameco (NYSE:CCJ) is seeking ~C$682M in damagesrelated to a dispute that has driven the companies to international arbitration.
    • CCJ filed for arbitration in May after Tepco had canceled its multibillion-dollar uranium supply contract with the company in January.
    • Tepco says it sees no impact from the arbitration to its earnings for now.
    • November Housing Starts: 1.297M vs. 1.240M expected and 1.256M prior (revised up).
    • Building permits 1.298M vs. 1.270M expected and 1.316M prior (revised up).
    • Northland Capital downgrades Cree (NASDAQ:CREE) from Market Perform to Underperform with a $28 price target.
    • The firm cites pricing pressure in the LED market as a valuation headwind.
    • Cree shares are down 5.7% premarket to $37.32.
    • Update: JPMorgan adds Cree (CREE) to the Analyst Focus List as a Short Idea.
    • The firm reiterates Cree’s Underweight rating and $28 price target.
    • Nomura Instinet downgrades Apple (NASDAQ:AAPL) from Buy to Neutral and lowers the price target from $185 to $175.
    • Analyst Jeffrey Kvaal says “the stock’s gains for the iPhone X supercycle are in the late innings” and thinks unit growth, if not ASP growth, is baked into the consensus and full multiple. 
    • The Nomura action marks Apple’s first downgrade since June.   
    • Apple shares are down 0.8% premarket.    
    • Previously: Mizuho Securities downgrades Apple; shares down nearly 4% (June 12)
    • Jack in the Box (NASDAQ:JACK) announces that it sold the Qdoba business to funds managed by affiliates of Apollo Global Management (NYSE:APO) for $305M.
    • The transaction is expected to close by April 2018.
    • Jack in the Box expects to use proceeds after tax and transaction costs to retire outstanding debt under its term loan.
    • Shares of JACK are under a trading halt.
    • Source: Press Release
    • GM (NYSE:GM) lawyers were making their first arguments in a New York bankruptcy court trial Monday, asking Judge Martin Glenn to throw out a $1 billion August settlement surrounding defective ignition switches in millions of recalled GM vehicles.
    • The deal was reached between plaintiffs and an entity that GM left behind as part of its 2009 $50 billion government bailout; the settlement would have GM pay $1 billion to that entity.
    • The defective ignition switches, which were linked to 124 deaths, triggered a recall of 2.6 million vehicles in 2014.
    • GM was up 2.2% in early trading.
    • Senators Susan Collins of Maine and Mike Lee of Utah said late Monday that they would vote for the Republican-led tax overhaul Tuesday.
    • Collins and Lee, two of the last remaining undecided Republican senators, had been key to securing the bill's passage.
    • The bill is now expected to pass the Senate even without the votes of Arizona Jeff Flake, who remains uncommitted, and John McCain, who will miss the vote as he recovers from chemotherapy treatment in his home state.

    Money Made Per Second

    Good story on ECB Bonds gone bad:

    Of course, once the ECB breaks the seal and it become public knowledge that the world's biggest hedge fund not only buys – as everyone had known – but also sells when it has to, all hell could break loose for those IG bonds on its books which are about to be downgraded to junk by one or more rating agencies, leading to the perilous scenario we described yesterday, in which "fallen angels" become very painful "falling knives."

    Until then, we will just keep an eye on Mario Draghi for the answer how long he can continue to burn taxpayer money by holding insolvent bonds and pretending that nothing has changed…

    This is the kind of nonsense Global markets are propped up with.

    ROFL!  

    There's a huge income divide when it comes to online shopping – not in how much we spend, but in who's doing the buying. All-America Econ Survey results:


  16. Story Stocks: CB&I, McDermott combine in all-stock $6 billion deal which combines onshore-offshore offerings (CBI)  (16.51 -1.41)

    12/19/2017, 10:34:04 AM ET

    CB&I (CBI 16.56, -1.36 -7.6%) and McDermott (MDR 6.88, -0.71 -9.4%) last night announced a merger deal which would combine the two companies to create a multi-national onshore-offshore company, with engineering, procurement, construction and installation service offerings. On the valuation front,…
    Full Article


  17. Chuck E Cheese tokens? Now why didn't I think of that? Oh yeah, I'd never do such a thing… but really. People bought it? A million bucks worth? Wow.


  18. Good article on Trump winery:

    In using the family winery to deflect questions about white supremacy after the deadly riots, the president did manage to plug yet another Trump product. A surprised nation wondered: How’s the wine?

    Illustration of Donald Trump.

    Trump wines are in fact hard to find except online; the winery’s Web site charges $18 to $54 a bottle for most of what it sells. Several calls I made to the Charlottesville office to find places to buy Trump wines yielded only the two restaurants I’ve mentioned and a chain called Total Wine, which claims to be “the country’s largest independent retailer of fine wine” and has 173 stores in 21 states, most of them in suburbs. (A representative of Trump Winery says the wines are distributed to retailers and restaurants in approximately 25 states.)

    This is not what you might expect from “one of the largest wineries in the United States,” as Donald Trump called it in a bizarre aside during a press conference following the deadly Charlottesville riots, in mid-August. Trump Winery isn’t even the largest winery in Virginia, going by the standard industry measurement of cases produced per year: at about 45,000, it is behind two other Virginia wineries that each produce 60,000 cases.

    The real reason Trump helped out his old friend was the chance to buy the estate for a predatory price, so laughably low that the bank which had seized the house kept refusing his offers. So he went around them, buying 217 acres that surrounded the mansion—in effect, the front lawn—from the trustees for Kluge’s adopted son; then the 776-acre vineyard for $6.2 million, plus $1.7 million in equipment and leftover wine; then the mansion itself, for $6.5 million. Kluge had initially put the mansion alone on the market for $100 million. At the time of the sale, Rausse recalls, “she said, ‘Gabriele, don’t worry—he’s my friend.’ ” And, indeed, Trump hired Kluge as director of the winery. A year later, he fired her.

    Tokens/Mkucs – It is truly amazing how dumb some people are. 


  19. I wanted the Bitcoin Guy on my team, but I heard Trump made him a better offer.


  20. He looks like he could stomp the crap out of some grapes.


  21. someone made a million dollars selling chuckecheese coins and this guy couldn't sell a Canadian maple leaf for $25

    there is no limit to human stupidity


  22. Huge amounts of premium sucked out of CBI options today. I was able to close out all my recovery positions and get back to even on a huge loss. Also avoided the sure-to-be messy options due to the merger. Happy to close the door on that one! Now if only FTR and GNC can come back some…


  23. market forecasting – it doesn’t matter whether it’s right or wrong. What matters is whether it got your attention. explains.

    Where the jobs will be in 2018:

    Markets looking weaker.  /TF nice short below 1,550.  Lined up with 24,750, 2,687.50 and 6,490.  

    Fed's Kaplan warns inverted yield curve would limit flexibility

    Top Republicans hit the airwaves this morning to defend their tax bill. It was a disaster.

    The main reason the GOP tax plan is a catastrophe: It will send health care costs through the roof

    Toyota will electrify entire vehicle lineup by 2025

    Here are all the companies buying Tesla's Semi

    The 10 highest-grossing movies of 2017 that ruled the box office

    CBI/Jet – Nice to get the money back in the very least.

    LOL BDC, I love those things.  


  24. Actually I would turn down the maple leaf for fear it was stolen or fake. When a deal sounds way too good to be true, just say no and walk away from the nut case. 


  25. Especially with a video running and the guy is holding a microphone. Obviously  some kind of YouTube pramk. He probably had to edit out 50 people who said they'd  buy it for every one who said no.


  26. CBI

    I too got out with a small profit but left my puts at $10 and $12.50


  27. Wow, Trump even finds ways to screw is friends to make more money! Probably a lesson for people talking to Mueller now and guessing if they should be loyal or not!



  28. Unbelievable the way FTE has cratered since the ex-div date :-(   

    Anyone have a clue sa to why?


  29. I meant FTR of course..


  30. My expectation was for that, on a rare correct call, because it looked  like funds were selling into the rise into the dividend.  Your basic manipulation.  As to why, for the same reasons people are skeptical of FTR in general;  I don't think there is any new info.


  31. KODK/Albo – What is it they actually do these days?

    FTR/Jet – Well a lot of people were just holding on for that and now they are selling with few buyers out there.  This is why we sold the $8 calls and, when they went in the money, this is why I told people not to worry about it.  Hell, in one of our positions, we doubled down and sold 1/2 $5 calls just to capture the dividend and bring our average down on the other half.  

    Boy, you can tell it's holiday time.  Quiet in the chat room, hardly any news…  I should have left for Vegas this week.


  32. Phil/M,

    I have 4 M 18 ($3.59)/ 22 ($2.59) Jan 2020 BCS. Now the current prices are $9.10 / $ 6.62 with a profit of $490 on an initial outlay of $400. It is half way on the total spread value. I understand these are long term and are on track. But want to understand do you do see anything here that can be done?

    thanks as always

    regards


  33. What a beautiful speech by the resigning Speaker of the House….what a lying son of a BITCH!! Bloody Jackass….


  34. Phil – KODK is still in the printing business and losing money.  They also have a packaging division which is growing and profitable and they still hold what look to be some valuable patents in material sciences.  Additionally they have some ancillary businesses that have some value and they are trying to find buyers for these.  As I previously said, they're no layup, but I think the stock can move up from here.  We'll see.


  35. Very interesting that we are now at the point of the tax plan getting final approval in the House and major market indexes are down. Market reacted very positive to the prior passing of House and Senate versions of the tax plan.


  36. House approved, not onto the Senate


  37. meant now, not not


  38. Rustle – I have problems with my fingers all the time….. i need to get some new ones that work.  Either way, i can follow your messages w/o the corrections :)


  39. The house passed the tax bill and the markets go up!  Who'd have thought that would happen?

    Still, nice, quicik gains on /TF to 1,542.50 so tight stops now.  

    Now the Senate has to pass it again and then it can be signed by Trump – his very first bill!

    Hopefully he'll keep the pen – it will be an important asset when the US declares bankruptcy. 

    M/Pat – That's a good one and it's good for $1,600 ultimately but $710 is still a lot to make off $890 and it's a nice, conservative spread now – safety is a factor.  If you don't believe M can possibly go lower and want to be more aggressive, you can sell 2 (1/2) of the 2020 $20 puts for $3.10 ($620) and use that money to roll the 4 short $22 calls at $6.65 ($2,660) to the $25s at $5.35 ($2,140) for net $520.  That gives you net $100 in your pocket and $1,200 more upside if $25 holds and, since you already have 2 short puts, it wouldn't be any more margin to sell on short Feb $26 call for $1.55 ($155).  That's 60 days away out of 750 so, if you can make 12 sales like that, you'll drop another $1,860 in your pocket while you wait for your boring old $400 to pay back $2,800.  

    Ryan/Jasu – I know, he makes me throw up in my mouth.

    KODK/Albo – You make it sound so nice I feel like scraping together $150M and buying the whole thing!  But then I look at the losses and the fact that sales are dropping 20% a year and I think I'll keep that money set aside for my flying car instead…

    And PS, why doesn't TSLA have a flying car?  Much as I think Musk is a con man, I'd still put money down on one of those!  

    Interesting/Den – They've GOT to be exhausted at this point.  

    Image result for very interesting animated gif

    Corrections/Batman, Rustle – I refuse to correct text messages (and most of my typing) unless it seems unclear what I meant – who wants a second message stating the obvious?  I figure most people can tell what you meant and the people that can't are probably not the people I'm talking to in the first place. 


  40. I like this one:

    No automatic alt text available.


  41. Wow, got to 1,540 on /TF – good for a non-greedy exit as the other indexes are bouncing a bit. 


  42. Phil, when selling partial covers while you wait for your primary trade to play out how do you decide what is a “good sale”? 


  43. GLUU- Albo, see any news? Nothing I can find. Perhaps tax selling? 

    Sold a few more puts today. 


  44. Phil – Did I detect a note of sarcasm in that KODK comment ?   Obviously it has fleas or else it wouldn't be down from 17 earlier this year.  Let's see where it is in 3 months.

    Pstas – Didn't see any news either.


  45. At this level, how does a broker look someone in the eye and say it's a great time to invest? (without smiling)


  46. OMI – finally started a position here, with todays engulfing candle – full buy/write: bot shares, sold June 25 call, sold June $20 put for net 16.45 entry.  


  47. This is nice:

    Good Ted Talk on Blockchain:

    Good sale/Jeff – Well it depends what I think about the stock.  In the above example, I think M will go up but not so drastically that it will burn a 1/4 sale and the rate of return is such that it's a very satisfying amount of money,  If I were selling GE calls, I'd be a lot more aggressive as I don't think there's much chance GE will suddenly pop higher.  Mostly it's about safely and comfort – when you do a 1/4 sale, it's super-rare that you'll get burned as you can do a 2x roll with no worries and then another 2x roll before you'd have to adjust the main spread. 

    No automatic alt text available.

    Sarcasm/Albo – No, that was my initial thought and then I took a closer look and noted my concerns and then I decided that, if I had $150M laying around, I'd rather get a flying car.  I'm pretty sure KODK will be up more than my car in 3 months…

    Great time to invest/Mkucs – Never forget that ALL these guys on TV did that in 2007/8.

     

    OMI/Scott – About where we last talked about it:

    Submitted on 2017/11/06 at 3:56 pm

    OMI/Scott – Good niche business with total crap margins ($100M on $9.7Bn in revenues) but that means they don't have to worry about competition – because no one would want half of that!  They don't really have options (illiquid, short-term) so I never bother with them but they are a nice long-term hold as a dividend play at this price if you are brave enough to ride out the storm.   Like pretty much every company that grows through acquisitions there days – they are getting trashed.

    Owens & Minor, Inc. — Moody's places Owens & Minor's ratings under review for downgrade

    Owens & Minor misses Street 3Q forecasts


  48. Scott – Awesome looking candle.  Good luck.


  49. Albo – thx. we'll see. i'll be out the stock if they lose 18, but will keep the strangle.


  50. Bloomberg just announced the House will have to vote again tomorrow… due to nit picking democrats.  That is a direct quote, not my words… Some problem with senate rules they didn't solve in their 1000 page bill. They screwed it up again!


  51. Is Santa coming or not? My goodness, I wouldn't want to be near the Great Orange One if he doesn't have a tax bill to sign on Christmas Eve… he might fire them all! I know he can't do that, but does he?


  52. These evil GOP people found ways to make the bill even worse during reconciliation:

    https://www.vox.com/policy-and-politics/2017/12/18/16791174/republican-tax-bill-congress-conference-tax-policy-center

    By 2027, more than half of all Americans — 53 percent — would pay more in taxes under the tax bill agreed to by House and Senate Republicans, a new analysis by the Tax Policy Center finds. That year, 82.8 percent of the bill’s benefit would go to the top 1 percent, up from 62.1 under the Senate bill.

    There is a special place in hell for people like them!


  53. "Since the Senate passed the initial tax bill 34 companies has announced $95+ billion in stock buybacks. What was that about jobs, again?"

    https://twitter.com/MollyJongFast/status/943304922728189957


  54. FT on US tax cuts (subscription needed): To justify a further jump in valuations, Mr Deshpande said, investors would have to believe that the US economy was now on a faster long-term growth track, and there was as yet little evidence to support that view.

    If the tax cuts do stimulate a surge in capital spending, it would raise hopes that such a structural improvement in growth rates is possible. However there is widespread scepticism among analysts about whether boards will decide to spend their tax windfalls in that way.

    Howard Silverblatt, senior industry analyst for S&P Dow Jones Indices, said companies were more likely to likely to focus on returning cash to investors through share buybacks. “Companies have a record amount of cash, and access to capital is cheap,” he said. “If a company was really able to invest in a new plant and make more money, why hasn’t it already done it?”


  55. maybe a silly question, but would it make more sense for them to perform a buyback after a market correction when their stock drops in value? 


  56. Good morning!  

    Getting the usual pre-market bounce (I guess we should bet on that) and a nice chance to short /YM at 24,850 with tight stops above that line.

    Good point from FT, Winston.  Also, look at the 30-year, still hovering along in the same range, so no one is buying Trump's growth numbers and, without those, this tax program will blow a hole in the economy so big we may look like Greece by 2027.

    Buybacks/Grass – Companies are generally idiotic about their buy-backs and often do them at the worst possible time.  They are wasting the company's money but the reason the CEOs do it is to support the prices while they cash in their own options or stocks along with the board so, basically, they rip off the ordinary shareholders and wreck the company's future just so they can cash in at a good price. 

    This weekly Dow chart cracks me up:

    They are all crazy


    • U.S. stock index futures are pointing to a higher open, all up by 0.3%, after the Senate approvedthe tax-overhaul bill on a 51-48 vote in the wee hours of Wednesday morning.
    • The measure will now head back to the House, which had passed it on Tuesday, following news that lawmakers violated a Senate procedural measure called the Byrd Rule.
    • The green light will send the bill to President Trump to sign into law, sealing his first major legislative victory in office.
    • It will slash taxes for corporations, revamp how the U.S. taxes multinational companies – as well as repatriation, and create a tax deduction for the owners of "pass-through" businesses.
    • The measure will also offer temporary tax rate cuts for some individuals and families, while sharply reducing the number of Americans who itemize deductions on their tax returns.

    Wall Street expects bull market to make history in 2018

    These 55 stocks have at least doubled since Trump was elected

    Big U.S. Banks Get Satisfactory Grades on ‘Living Wills’Regulators sign off on banks’ plans spelling out how they would fail without needing a taxpayer bailout.

    Bitcoin plunges $1,000 in less than an hour

    Crazy town: Tiny fruit juice company soars on speculated move into bitcoin that likely isn't real

    12 Days in Xinjiang: How China's Surveillance State Overwhelms Daily Life

    In Dramatic Reversal, China Gives Up On Deleveraging Pledge

    • Looking to drag the economy out of recession, Saudi Arabia has unveiled its largest budget ever, forecasting expenditure to hit more than 978B riyals ($261B) in 2018.
    • The news comes as Saudi air defenses intercepted another rocket fired toward Riyadh by Houthi fighters in Yemen, who declared a "new chapter" in its confrontation with the Kingdom.

    Aribnb launching its own apartment complexes

    • Airbnb (Private:AIRB) is teaming with a Miami-based developer to launch "Niido Powered by Airbnb," a brand of residential complexes specifically designed for home sharing – i.e. specially-designed leases, a "master host" in charge of check-in and cleaning, keyless entry.
    • Brookfield Property Partners (NYSE:BPY) is also an investor, and the first $20M will go toward a 423-unit property in Kissimmee that's already under construction. Another three communities are planned before the end of next year.

    WTI/RBOB Extend Gains After Bigger Than Expected Crude Draw

    U.S. crude supply fell 5.2M barrels last week, API says

    • The American Petroleum Institute reportedly shows a draw of 5.22M barrels of crude oil for the week ending Dec. 15, vs. last week's draw of 7.38M barrels.
    • Gasoline reportedly shows a build of 2M barrels and distillates show a draw of 2.85M barrels.

     

    • Alcoa (NYSE:AA) is reiterated with an Outperform rating and $55 price target at Morgan Stanley, which says the stock continues to trade below its global peers, making it an attractive buy ahead of its earnings report.
    • Stanley offers a half-dozen reasons to own the stock, including: China's aluminum supply restarts and the overall supply picture should become clearer, reducing pricing volatility/uncertainty; aluminum prices should continue to edge higher; China's capacity and pollution controls are raising the cost of building and operating aluminum smelters in China, which should hold down new supply; the company likely will start paying a dividend next year; interest from investors outside the U.S. is increasing since AA currently screens as the least expensive high quality aluminum pure play globally; and the stock may be included in more equity indices next year.
    • The firm raises its EBITDA outlook to $850M, above the $820M Wall Street consensus, although its $1.20 EPS estimate is below the $1.25 consensus.
    • China is planning to start a giant market to trade credits for the right to emit greenhouse gases.
    • The program would initially cover the nation's state-dominated power generation sector, which produced almost half of the country’s emissions from burning fossil fuels last year.
    • If it works as intended, Chinese power companies would have a financial incentive to operate more cleanly.

     

    • UBER is a transportation firm and not a digital company, according to a long-awaited verdict from the European Court of Justice.
    • The decision is expected to have major implications for Uber, which now faces national regulation across Europe, but the ride-hailing service downplayed the consequences.
    • "Any ruling will not change things in most EU countries," Uber said in a statement.

    Boeing(BA) Unveils New Drone Which Will "Change The Future Of Air Power"

    North Korea Reportedly Testing Anthrax-Tipped ICBMs

    FedEx(FDX) Raises Forecast, Says Tax Changes Could Boost It Even MoreFreight carrier’s revenue climbs on what it calls a record holiday season?

    FedEx(FDX) crushes earnings and revenue figures, boosts its full-year guidance

    Macau revenue expected to rise 14% in 2018

    • Macau gaming revenue is expected to increase 14% in 2018, according to Bloomberg's median analyst forecast.
    • A surge in VIP gaming and new properties coming on line are seen underpinning the growth.
    • Daiwa's forecast of casino market share for next year shows Galaxy (23%), Sands China (21%), Melco (16%), Wynn Macau (15%) and SJM (15%) all tightly bundled. MGM China (10%) is seen lagging its peers just a bit.

    Toys 'R' Us closures boost for Target?

    • Toys "R" Us is reportedly considering closing 100 more stores across the U.S. as it restructures its business, and Target (NYSE:TGT) may be a top candidate to win those customers' dollars.
    • According to UBS analyst Michael Lasser, "93% of Toys "R" Us stores are within a 15 minute drive of a TGT, while TRU and Target are exposed to a similar consumer demographic."

    Mortgage REITs lower as yields break out to the upside

    • The 10-year Treasury yield had been holding in a fairly tight range of about 2.30-2.37% for the past couple of months, but has shot up to 2.47% today – it's highest level since early March.
    • Helping today's move higher in yields was a strong housing starts report for November.
    • The mortgage REITs (REM -4.3%) – many trading at negligible discounts to book value, if not premiums – are lower across the board, led by Annaly Capital (NLY -1.6%) and AGNC Investment (AGNC -1.8%).
    • Among other names: Armour (ARR -1.9%), CYS (CYS -2%), Western Asset (WMC -1.2%), Capstead (CMO -1.5%), MFA Financial (MFA -1.5%), Dynex (DX -1.4%)

    Deals Boom in Push to Move Health Care Out of HospitalsManaged-care companies such as Humana are plunging deeper into the business of delivering health care outside hospitals.

    Intel(INTC) CEO to employees: 'We are going to take more risks' 

    • "If there's one thing about the future I am 100% sure of, it is the role of data: memory, FPGAs, IOT, AI, autonomous driving… We're just inches away from being a 50/50 company, meaning that half our revenue comes from the PC and half from new growth markets."

     

    Micron(MU) beats, guides above Wall Street expectations