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  1. phil

    Big Chart – Wow, the Nas may test the 15% line at 6,210 at this rate.  Now we should calculate the drop from the 20% line (6,480) – even though we didn't hit it.  6,350 was the 17.5% line, so over that is going to be bullish again.

    Had we completed the move from 6,210 to 6,480, that would have been 270 points and call it 250 and call it 6,200 and 6,500 so we have a weak retrace of 50 to 6,450 and a strong retrace of 100 to 6,400 and those are clearly blown.  

    6,500 back to 6,200 then gives us a 50-point weak bounce to 6,250 and the 100-point strong bounce at 6,300 and those lines are the ones that are in play and they are bearish lines – as opposed to retrace lines, which are in play from a position of strength when they hold up.  

    Each 25 points on the Nas is significant and 6,350 is the 17.5% line, so super-significant there but we're miles away now and simply trying to make a strong bounce but failing 6,300 today will be a very bearish sign for the Qs.

    Tax Deal/StJ – I think they will push something through.  They don't know how long Trump will be President to sign it.  

    Bitcoin/StJ – I find those numbers hard to believe but I guess it's possible.  

    Interview/Pirate – The one in yesterday's post?   It works for me but I do have a Twitter account.  Sign up and follow me!  

    LB.TO/Tommy – Well what bothers me is that it was 4.9% of one portfolio they sold which, if you apply that to their whole portfolio, can get very ugly.  And now people are going to be looking for discrepancies (like when one person gets food poisoning, the whole chain goes under scrutiny).  I wouldn't jump right in and I'd wait for the audit and, hopefully, it discloses more bad loans but not so bad it justifies the next big sell-off.  You should go into that event prepared for a number and be ready to buy on bad news if it's not as bad as what's priced in.  On the whole, I was loving Canadian banks earlier in the year and last year but now they've appreciated to about the right price – so not too exciting. No reason to short them though.

    HRB/Baron – Aren't you the one I gave the bullish play to?  

    Submitted on 2017/12/05 at 12:01 pm

    HRB/Baron – Now there guys I love when they are cheap:

    There's not likely to be anything exciting about these earnings but you can pick up the July $24 ($4)/30 ($1.40) bull call spread for $2.60 and it pays $6 if all goes well for a $3.40 (130%) in 6 months if all goes well.  If earnings are disappointing, then you can sell puts like 2020 $20 puts, which are $2.60 now while the $25 puts are $4 – so in that range and that would more than pay for the spread and then you can invest in rolling the long calls so, either way, it's a good position.

    I know it doesn't seem sexy but already the July $24s are $5.40 and the July $30s are $2.20 for net $3.20, which is up 0.60 (23%) in a day.  

    It's not just about being right or wrong.  What I liked about the trade was that, even if earnings were bad – I still like HRB for the long-term, so I could adjust the trade and get another chance at it down the road.  The short bet was a one-time thing where you HOPE they disappoint but, if they don't disappoint – what is your comfortable exit strategy?  

    You are never going to be right (or wrong) 100% of the time.  Most people are 55/45 (mostly wrong) and the best stock-pickers are thrilled with 60/40.  The rest is all about risk-management and having a good plan for what to do when you are wrong.  Even if you are only right 40% of the time, if your winners pay 2:1 and your keep your losses at 50% then 10 $100 bets yield: $200, $200, -$50, -$50, -$50, $200, -$50, $200, -$50, -$50 - and that's STILL net +$200.  THAT is the goal of investing – win more than you lose on each bet and THEN worry about improving your guesses!  

    Questions/Seer – Well that will be up to you.

    Butterfly/Options – Well I watch the net of the rolls and, sometimes they are favorable and sometimes not and I try to pick good spots in the ranges and take advantage of good prices on each end.  Once there's no premium in a short put or call – it's no longer working for you so it's a good time to do something – unless you think it's got value as protection, of course.  In general, I try not to make changes more than the usual monthly updates – one of the points I like to hammer home in the portfolios is NOT to constantly mess with positions.  If you have a balanced portfolio, the number of things that work out tend to outnumber the number of things that hurt you by leaving them alone over time.  

    What would I have done?  Well either next week or in a month I would have made the adjustments but, since I think we're going to correct, I'd probably wait until Jan to see where we are.  

    TEVA/Jabob – Doesn't look like there's a deal with AMZN.  

    CLF/Stock – Benefit from protectionism.

    Slowdown in China is spooking people but CLF could care less:

    That's what I like about them.  

    As a new trade, you can sell the 2020 $7 puts for $2.50 to net in for $4.50 and leave it at that or you can add 2x the 2020 $4 ($3.10)/7 ($1.95) bull call spreads at $1.15 for a net 0.20 credit on $8 worth of spreads that are $4 in the money so far (though, at $6, you'd have to give $1 back to the short puts and only make 300% if CLF stays flat).  

    HBI/Jeff – Well our trade last Tuesday was

    In the OOP let's:

    • Sell 15 HBI 2020 $20 puts for $3.50 ($5,250) 
    • Buy 25 HBI 2020 $18 calls for $4 ($10,000) 
    • Sell 25 HBI 2020 $23 calls for $2 ($5,000) 

    We did double that in the LTP and now the $20 puts are $3.10 ($4,650) and the $18 ($4.50)/23 ($2.40) bull call spread is $2.10 ($5,250) for net $600 which is up $850 (340%) in a week.  I think the puts were $3.40 by the time we got in but the spread was an easy fill at $2 but the point is there's no loss there and you can certainly keep it as we're going to go right back in and I'd still do this position since it's now more in the money and still about the same price with $12,000 more to gain.  

    Remember, we are cashing in our portfolios because they are there to TEACH people.  If you have positions you like, there's no need to get out of them if they are well-hedged.  We're expecting a 20% correction that might not even come but, rather than hassle with keep this and not this and jiggle around all our positions and hedges and make a huge mess – why not just cash out and start from scratch?

    It doesn't mean you have to – we're only going to go back into most of the positions we have now – only smaller as we're banking $2M in gains!  





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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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