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10% Tuesday – Market Correction Hits Our Primary Goal

Wheeeee, what a ride!

That $6,205 profit is just what we made playing the bounce overnight on the Russell as I said to our Members at 10:54pm (yes, we work all night!):

I take it back, picked up 2 long /TF for fun (1,429).

/YM also tempting above the 23,400 line with tight stops below.  Getting back the 1,000-point drop would be $5,000 per contract!

The Dow (/YM) Futures also did well, topping out all the way back at 24,100 with a stop-out at 24,000 for a gain of $3,500 per contract.  Again, this is why we love trading the Futures – this is just our overnight money but it also serves to lock in the gains we made on our hedges and now (6:30 am) we're looking to play for a bounce off 2,600 on /ES, 6,400 on /NQ, 1,450 on /TF and 23,750 on /YM but, if they break down, we'll use the 2,600 line on the S&P for shorting so, either way – we are able to make fine adjustments to our portfolios on the fly.  

Now that we're down 10%, we'll see how 2,550 holds up on the S&P (/ES) but we should get a nice 2% move higher as simply a weak bounce from here so we're targeting 2,600 as a weak bounce and 2,650 as a strong bounce and anything less than that is going to be a sign of further weakness.  We already tested 2,650 at 4am and failed and, as I noted above, we're ready to short at the weak bounce line if it fails or go long if it holds.  Though it was ugly, the sell-off was not unexpected – as I said to our Members:

At some point, they have to start taking some profits.  Always tricky to call a top but what's so dangerous about this market is how low the volume has been on the way up and how narrow the focus has been on index leaders.  When selling does begin – there aren't going to be many buyers and things can drop really fast.

This is what I mean by "there aren't going to be many buyers."  Yesterday's declining volume was 5.1Bn shares (96% of all volume) while advanciing volume was 169M shares (4%).  That is what caused the market to drop like a rock attached to a bigger rock and, so far, there's no proper sign of a floor – we're just playing for the technical bounces off the 10% line at the moment.  

We need 10 TIMES more buyers than yesterday just to get the declining volume to "only" outnumber advancing volume 4:1.  Kind of hard to get bullish when confronted by logic, right?  That brings me to another comment I made to Members back in December:

People will step in to buy any dip (we saw that in 2008) and I'm not saying this is 2008, when it turned out that Bank "earnings" were flat-out fraudulent and energy prices collapsed and wrecked that sector and the housing market collapsed and wrecked that sector and we were in an all-out panic mode.  Now we are actually in a pretty good economy with lots of positives and improving earnings and not too crazy housing or energy prices and the only people allegedly faking earnings are Tesla (TSLA) and AliBaba (BABA).

Most companies are doing pretty well – just not so well that they deserve these kinds of multiples, which has kind of been my theme for warning you over the past month – whose ridiculous, unwarranted gains have finally been erased over the past few days.  I know I've been sounding like a stick in the mud and I know I've been against deploying too much cash "until the correction" but this is why I wanted to wait and now, I'm still waiting to make sure 10% is enough of a correction to satisfy the Market Gods (Algos).  Here's a quick summary of how we got here:

  • Jan 4th: Follow-Through Thursday – Dow 25,000 and Bust? -- "You can't just keep rewarding the market for doing the same thing it always does otherwise, as I warned back on November 29th, we will all be Billionaires.  While I'm sure you want to be a Billionaire, what's the point of it if everyone is a Billionaire?  If that happens, you're going to be nothing if you aren't a Trillionaire – that's what happened in Zimbabwe, where they were printing $100,000,000,000 bank notes in 2009, right before their currency completely collapsed."
  • Jan 5th: Friday Follies – Trump Promises Dow 30,000 -- "Meanwhile, we still expect a 10% correction as people take some profits off the table in our lower-tax environment and we're still thinking that Q4 earnings and 2018 guidance are going to be disappointing to investors – especially for companies who will be repatriating those overseas profits and paying one-time tax bills (good buying opportunities if they sell off on that news, however)."
  • Jan 9th: 2,750 Tuesday – S&P 500 Hits it’s Next Benchmark -- "Not only is the S&P testing the 2,750 line but the Nasdaq 100 (/NQ) Futures are just under 6,700 – and that's up 10% since October!  We're using the Nasdaq's ultra-short ETF (SQQQ) as our primary hedge at the moment as we really can't believe earnings are going to live up to the hype but it's not really about earnings – it's about the new tax law and what it can drop to the bottom line."
  • Jan 10th: Weakening Wednesday – Did China Find the Market’s Achilles Heel? --  "Even more of a danger to stock indexes would be rising bond rates and the 30-year notes have already jumped 4% in the past 30 days to 2.8%, a critical juncture as that puts it above the dividend rate of the S&P 500 and, since bonds are "safe", it makes for a compelling argument for some investors to begin cashing in their outsized market gains and putting the money away into inflation-beating (per the Fed) bonds for long-term security." 
  • Jan 16th: Terrific Tuesday – Futures Blast Market to New Highs – Just Because --  "There is some really crazy stuff going on in the markets at this point.  Coca-Colar (KO), for example, is trading at 45 times earnings and 36 times cash flow even though revenues dropped 14.6% year over year.  Merk (MRK), another Dow Component and another S&P heavy-weight, is trading at 56 times earnings and 39 times cash flow despite 3-year average sales declines of 3.3% PER YEAR.  McDonalds (MCD) is trading at almost 50x cash flow but "only" 25x earnings thanks to massive stock buybacks – something that is saving many companies these days.  Sales at McDonalds are down 10.4% from the prior year and the stock has jumped over 50%, from $115 to $175 as "punishment"."
  • Jan 18th: Thin Air Thursday – Markets Begin to Gasp At New Highs --  "As we're moving into earnings season, this last leg of the market bubble is being driven by earnings revisions due, mostly, to Trump Tax Breaks but, as we warned about in December, the reality simply isn't enough to justify the gains.  This is a great BoA/Merrill chart showing how guidance for the S&P has moved up from 148 to almost 151 since the Tax Plan passed.  
  • Up and up the markets go but we see shorting opportunities this morning IF we cross back below Dow (/YM26,100, S&P (/ES2,800, Nasdaq (/NQ6,810 and Russell (/TF1,585.  The rule of thumb for shorting the futures is wait for 2 to cross below and then pick the next one that crosses and keep very tight stops back above the line and if ANY of the indexes go back above their line – kill the trade and wait for the next set-up.
  • As I pointed out on Thanksgiving, traders will be disappointed with Q1 results because Corporations were only effectively paying 13% of their income in taxes so "cutting" the official tax rate to 20% really doesn't make much of a difference.  The S&P 500 has added over $2Tn in market cap since than and certainly $2Tn hasn't actually flowed into the index.  In fact, S&P net money flows on any given day are usually from $5 to $10Bn so, even if ALL 40 market days since Thankgiving were $10Bn inflows, that would only account for 20% of the indexes gain and, in reality, it's about half that so the rest is speculation that will need another 400 days of inflows to actually support the current prices.
  • Jan 22nd: Monday Market Movement – With No Government, What Will Move Us? -- "We're not going to be able to have a stable growth economy if all the benefits accrue to the top so we're remaining cautios on earnings and, as I noted, we added a couple of hedges to our Short-Term Portfolio on Friday, which were also published in our Top Trade Alerts.  From a Futures perspective, we're watching Dow (/YM) 26,000, S&P (/ES) 2,810,  Nasdaq (/NQ) 6,850 and Russell (/TF) 1,600 and, as usual, we short the last one to cross under with very tight stops if ANY of the indexes get back over their line so risking very small losses against nice potential gains."    
  • Jan 23rd: Tariffic Tuesday – Trump Declares Trade War in Davos --  "Tariffs and trade wars have never worked and Trump vasly underestimates the Global Economic power China now commands.  This can all turn very ugly, very fast and – if we weren't hitting the top of the market before – I'd say we're forcing one now though these are slow-moving effects and it may take about 6 months to be able to look back at this moment and say "Yep, that's where things really went to Hell."  
  • Jan 24th: Record High Wednesday – Diving Dollar Boosts Equity Markets -- "Unfortunately, we have to consider that earnings are also priced in Dollars so companies that aren't earning 12.5% more than they earned last year are actually losing ground when priced in gold, silver, Euros, Yen, Yuan, BitCoin, oil, etc…  This is especially true for S&P 500 companies who make more than half their money overseas and are currently getting the most favorable conversion rates in decades – making this a great time to repatriate money."
  • Jan 25th: Thrilling Thursday – Nasdaq 7,000 Is Our Next Summit -- "Sometimes, the crowd gets things right though not this time – this time the crowd is full of idiots who are chasing a trend off a cliff…  Meanwhile, if this rally doesn't calm down – we're going to need a bigger chart (we are shorting Nasdaq Futures (/NQ) below the 7,000 line with tight stops above as well as S&P Futures (/ES) below the 2,850 line."
  • Jan 29th: Monday’s Market Magic Trick – Rising Without the Fed? -- "People consistently overpaying for housing led to the housing crisis that tanked the Global Economy in 2008 and now, Corporations are binge-buying their own overpriced stock with all the free, ARTIFICIALLY low-interest money that has been floating around in order to bail people out of the housing collapse.  Isn't it obvious that this is only going to lead to a stock price collapse down the road???"
  • "I'm not saying the economy sucks or is even in trouble (though China is and Japan is) but it's not so great that we should be paying 30 times earnings for hardware stores or sneaker companies or soft drink makers – all of whom historically trade at more like 15 times earnings than 30.  We had this same conversation about housing back in 2005, 2006 and 2007 and it took 3 more years of record gains before the market finally corrected so far be it for me to keep you from having fun but please, Please, PLEASE:  Be careful out there!"

Then, last Wednesday, I went on Money Talk and led the show off stating: "I think we'll follow-through another 2.5% to the downside," which turned out to be an understatement. Fortunately, we put our money where our mouth was, adding a hedge on the Nasdaq Ultra-Short (SQQQ), which we went over in yesterday's morning report, so I won't do it again here.  

It's good to do a little review so we remember how we got here and what our premise was – because it's tempting to throw all that out the window and panic while the 10% correction you've been predicting is actually happening but, so far – this is all going according to plan – "even when the plan is horrifying."  So, at this point, we have our hedges and we're not worried yet but we will want to add more hedges if we think things are breaking another 10% lower and it's our 5% Rule™ that takes the emotion out of that decision.

The same way we expect bounces of 50 and 100 points on the S&P that will not get us excited, we may also see what we call an overshoot that goes 50 or 100 points below our 2,550 target and we won't be jumping on the down 20% bandwagon until we see 2,450 fail.  Now, knowing that we go back to Fundamentals and we have to consider whether the market SHOULD be down 20%, to 2,250 and that's what we call our "Must Hold" line on the Big Chart (2,200 actually) and no, we don't really expect that much of a correction – therefore we're leaning a bit bullish here at 2,550, expecting a bounce is more likely than another 50-point drop.

This is, so far, simply a much-needed correction in a market that had gone too far, too fast.  It would be fantastic if we settle down here and move around the 2,550 line for a while – up and down 100 points and consolidate while the rest of earnings play out because a quick rebound won't be healthy and an additional drop will quickly erode confidence and possibly lead to too much of a correction – though we'd be thrilled to buy down there – as we still have most of our cash on the sidelines.  

Meanwhile, we have our Watch List and we'll be adding more stocks now that we have a few more bargains in the market.  Most of the stocks on our list are still playable but it's a WATCH List, not a BUY List – as we need to see a solid base form before jumping back in.  Meanwhile, the best use of our sideline cash is making adjustments to our exisiting positions and we'll be exploring that today and in tomorrow's Live Trading Webinar (1pm, EST).

 


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  1. I wonder if it's a good time to pick some Apples(AAPL) on laying around on the floor?


  2. Phil – "seems like severe lack of liquidity is causing a massive melt-down as people try to sell."

    Like I wrote in this forum on Jan 29th… 


  3. "The bottom line is our net foreign liability position has increased. If spreads widen, and or equities sell off, viz. those assets lose their attractiveness, what happens if the foreigners begin to liquidate? Food for thought."

    Your spot on Phil.  Adding to the mix,  a thinly traded market with a high ratio of foreigner holders losing faith, could be a recipe for disaster.


  4. Watch the dollar, if due to a liquidity squeeze it takes off to the upside, those with dollar debt (read foreign holders) may be forced into additional liquidation of holdings to make margin calls.


  5. FU SVXY!!!!!!


  6. Good Morning.


  7. Adding the VIX to highlight the sheer madness of yesterday's move!


  8. I am trying to recall a day where the VIX moved more than 100% at once. We have been clearly way to complacent the past year or so! This is leading to a black swan event for all the inverse volatility instruments. We'll see how things shake up this morning but could be a buying opportunity. 


  9. What about forecasts?

    "The past couple of days are only the beginning of what could be still a substantive bear market in stocks," says veteran market pundit Dennis Gartman for our call of the day.

    "It's been nine years of a bull market. Can we give back 12%, 15%, 17% over the course of the next several months?" the editor of The Gartman Letter asks in a Bloomberg TV interview (https://twitter.com/markets/status/960703338302943232).

    "I'd be somewhat surprised if we didn't do that."

    One key thing about Gartman is that many traders view him as a contrarian indicator, pointing to infamous misfires such as his prediction that oil wouldn't regain $44 a barrel in his lifetime (https://www.cnbc.com/video/2016/01/25/wont-see-44-crude-in-my-lifetime-gartman.html).

    The reactions to his latest call so far include "Odds are we get a #TurnaroundTuesday (https://twitter.com/robin_HODL/status/960725265692282880)" and "We've probably bottomed (https://twitter.com/StoneDare/status/960662530141114368)."


  10. Freakin' Trump out of control again – can't criticize the president apparently. What is this – North Korea:

    https://talkingpointsmemo.com/livewire/veteran-sen-drags-cadet-bone-spurs-after-trump-calls-dems-treasonous

    Sen. Tammy Duckworth (D-IL), a veteran Army helicopter pilot who lost both her legs while serving in Iraq, was one of several Democrats who had some choice words for President Trump after he told a crowd in Ohio on Monday that Democrats should be considered “treasonous” for not clapping during his State of the Union address.

    “We don’t live in a dictatorship or a monarchy,” she tweeted Monday evening. “I swore an oath — in the military and in the Senate — to preserve, protect and defend the Constitution of the United States, not to mindlessly cater to the whim of Cadet Bone Spurs and clap when he demands I clap.”

    View image on Twitter


  11. SVXY and some other VIX ETPs halted pending further news. Tastytrade commentators mentioning that it may have gone out of business based on the internal ETF rules (but you can probably take that with a pinch of salt).


  12. Gartman / Jabo – I guess we are safe now. A huge bounce is coming up then…


  13. Hopefully, Gartman is bullish on the VIX.

    Going to be a bloodbath on the VIX shorts.

    SVXY worthless?


  14. GILD   in all the turmoil yesterday a trader sold 1300 Jan2020 $60 puts to buy the 2020 $82.50/$100 bcs


  15. Some perspective from Josh:

    http://thereformedbroker.com/2018/02/05/dow-drawdowns/

    Now we have to decide whether or not we want to blame this on former President Obama or on current President Clinton. Obviously, there’s no reason to let either of them escape accountability.

    We should also consider what impact, if any, this recent action may have on incoming Federal Reserve chair Jerome Powell in terms of how far they want to go on rate hikes this year.

    I think it’s worth pointing out that some people are selling because the Constitutional Crisis is now a full-blown thing, no longer an open question. Some people are selling because it’s a growth scare and higher wages / interest rates might take a chunk out corporate profits. And then some people are selling because they aren’t people at all, but software programs that have been programmed to sell when others are selling.


  16. SVXY can't handle a 100% vix move huh? No wonder put options always had at least some value no matter how expensive this got. I have 35 puts that went from $3 to $35 in one trading day.


  17. retail investor getting fucked….inverse ETF stopped trading. how to get out of the positions.


  18. ~~•ProShares Short VIX Short-Term ETF: ProShares issues statement, expects the fund to be open for trading today and they intend to continue to manage the fund as usual.


  19. wow Fidelity is SUPER SLOW.  I can't login, the page just stays loading.  Haven't experienced this in ages.


  20. SWKS – Up 10%.  Billion dollar stock buyback.


  21. VIX already down 30%…


  22. Albo – Yes SWKS – the CEO also mentioned there is a pause in orders for flagship products this qtr but they are ramping up 2Q onwards.  So much for iphone X slowdown…. besides AAPL has already started the buy 1/ get 1 free iphone 8 deal which should set up 2H 2018 nicely for a ramp.   It may be good time to pick up some AAPL and initiate a new position in SWKS.  


  23. Kinki.

    Fidelity is having system-wide issues – FAP won't execute orders. You  can call and they will enter orders and may waive comm  – if you smile at them.


  24. wow that AH SVXY buy was right on — except for the BK!


  25. STJ – Instead of waiting for SVXY to open, the play today would have been shorting UVXY at the open.


  26. XIV is getting liquidated:

    Credit Suisse announces plan to liquidate XIV inverse volatility ETN

    https://www.marketwatch.com/story/credit-suisse-announces-plan-to-liquidate-xiv-inverse-volatility-etn-2018-02-06


  27. maybe the brokerages will reverse AH trades?


  28. vxx halted


  29. 8800:  Yep. I managed to logon, but I still can't see my positions or my open orders.  oh well….


  30. Good morning!

    VIX at 50!  SVXY at $15 – maybe.  What a disaster that is.  Not sure if it can recover now, even if the VIX goes back down as VIX down 50% only raises SVXY 150% at best and, with the Dow opening down 550 – not like it's going to correct very quickly.  

    On the bright side, in the STP, we're going to get $60,000 for 20 $140/110 bear put spreads but then we sold 6 $130 puts for $7.60 (should have just bought them!) and those will hit us for $115 at $15 for a loss of $69,000 so down net $9,000 is not a good hedge and we paid $22,000 for it so big disaster overall. 

    Nothing to do but wait for the dust to settle, word is they are going to withdraw the ETN, whatever that means at this point.  To some extent, this is what happens when any crowded ETF has to unwind, the ETF was forced to buy VIX to cover as people sold the fund and that then caused the fund to sink further as the VIX rose, forcing them to buy more VIX to cover.  It's going to correct quickly, but not sure if the damage will be undone.

    Meanwhile, all the time in the World to hit our long lines on the indexes, which were and are:

    Well, another shot at /NQ 6,450, which was good for 100 points ($2,000 per contract) just an hour ago.  2,600 on /ES 27,750 on /YM and /1,460 on /TF all need to be over as well to stay bullish and TIGHT STOPS below – as these can also be used as shorting lines – especially 2,600.

    AAPL/Dave, All – It's a great day for put selling as the VIX is high and we're getting great panic-driven prices so look over the Watch List and find stocks you REALLY want to own if the market corrects another 10-20%.  For instance 2020 $140 puts are back to $13 and $125 puts are $8.50 and, if you aren't willing to get paid $8.50 to promise to buy AAPL for $125 - then you must really hate AAPL!  

    That being said – still a bit of a falling knife so it might go lower but the Delta is 0.20 so each $5 move in AAPL will pump up the short puts $1 (in theory) and figure $140 would be a hard floor so you risk being down about $3 if we dive lower on the $125 puts but you'd still have 10% lower before you even have to pay the short caller a penny back.

    Took $122 on /KC and ran by the way.  Nice $1,462 gain on 2 contracts. 

    SVXY seems halted while the VIX calms down.  Very annoying.  

    Foreigners/Naybob – And we had all those super-negative polls about the US and Trump last month and "Shithole countries" and Tariffs since then have not improved things.  

    Dollar/Naybob – I have 8 longs so fine by me!  

    Outflows/Seer – Isn't that the same JPM that said the market wasn't overpriced last week and suggested people rush into equities to avoid missing out?  Never trust Banksters.  If they are telling the public – it's either because they already told all their HNW clients or because they want to place the opposite bet.  

    Uh oh, /TF did not like 1,500 – rejected!  Lined up with 24,600, 2,660 and 6,600 (also a key rejection).  /YM 24,400 is my choice for a shorting line (tight stops above!).


  31. Albo – I tried selling calls against VXX but it moved too fast! Impossible to follow unless you are a machine anymore!


  32. VW killing it in theHybrid market (waiting list already! for their GTE) but yeah, oil demand can only increase ….. This may be moving faster than we thought if people decide to trade in.

    https://www.autotrader.co.uk/content/news/sales-halted-on-vw-s-golf-gte-due-to-huge-demand

    I saw one of these today and they are smart looking cars.  


  33. Can't access TD. System is down. How convenient when I'm ready to cash out of my puts.


  34. SVXY / Phil – I think that it was a very valid hedge but as with the other hedges, it might have been better to sell puts on another instrument to pay for the spread. 

    That VIX move has probably killed a lot of volatility traders! That had been the big crowded trade the last couple of years.


  35. Big Chart – Wow, suddenly we have 5 red boxes after being down to our last one at one point.  That's why I'm satisfied with this correction, we're back in reasonable ranges now as 20% up or down from the Must Hold line is fairly normal market movement but 30% was just silly.  

    VIX/StJ – As noted above, don't read too much into it as the ETFs have broken the index.  Those things are dangerous!  

    Gartman/Jabob – If he says "sell" then we'd better BUYBUYBUY!!!  Yikes, how does that man look in the mirror every day? 

    Slow/Kinki – Another reason to ALWAYS have hedges in place.  In major melt-downs, you can't even adjust your positions sometimes. 

    UVXY/Albo – True, good play but you have to have balls of steel.

    Demand/Malsg – Once the Aramco deal is done, the Saudis won't be willing to spend Billions propping up the oil market anymore and we'll probably be back below $50.  

    TD/Pirate – ThinkOrSwim is up.

    SVXY/StJ – Well we made a fortune last year doing the same thing, just didn't realize what a ticking time-bomb it would be when the market finally did correct.  Fortunately, the LTP is only down 3% (but down from up 5%) so the damage to the paired portfolios is limited but lesson learned, not worth the risk!


  36. TD shut me down and cannot log in. Something going on.


  37. SVXY / Phil – What killed it was that unique VIX move. It had never moved that much in one day before even during the 2008 crisis. I guess the spring was loaded and the bots simply created a huge chain reaction. When you see the moves we saw yesterday – down 1600 and then back to down 900 in 15 minutes, it gives you pause about trading any instrument short term. How many people got killed trading futures on the Dow yesterday. You just can't react as fast as the bots and they make everything worse!


  38. Phil

    SVXY

    Looking back maybe we should have done a put spread on the 130 put sell

    I am thinking maybe in the future always sell a put spread on any stock no naked puts

    What do you think? is that a good idea

    Thanks


  39. In the meantime, down we go again. People might now be selling the pops!


  40. stjean: I don't think its "people" since nobody can log in to their accounts. 


  41. I have a TZA July $9 $15 BCS similar to what is in the OOP, obviously happy to have it.  Thoughts on adjusting to lock in profits? 


  42.  I keep getting a virus blocked from this site


  43. Been happening since Thursday I think


  44. from feed the bull dot com, get's blocked warning every time I post and says it's coming thru your site. No worries as it is blocked, just thought you should know


  45. says it's a trojan, malicious link


  46. Ah! It is this site that keeps infecting my machine?  I keep getting it.


  47. Use protection… ;)


  48. is svxy going to trade today?

    what a POS!!!!


  49. Best to run a scan on your User folder and that should catch it.  A crypto miner by the looks of it.  Every time it fires up my anti-virus grabs it but then the site infects the cache file in Chrome.


  50. I want to see how the day goes before we start adjusting things so, for now, I'm going to work on new Watch List items but I'll do them here and combine the list later:

    BRK.B (2/6/18) – A great proxy for the S&P and way down from highs of $215 to $198.  You can sell the 2020 $165 puts for $9.50 and that nets you in for $155.50, which is a very fair price for them so let's sell 5 of those in the LTP for $4,750

    SEE (2/6/18) – is a fun one when they get cheap.  They make bubble wrap and who doesn't love bubble wrap?  If you like AMZN why wouldn't you like packing materials but they just dropped 10% for no particular reason and we can sell 5 2020 $42 puts for $4 ($2,000) in the LTP and that nets us in for $38 on 500 shares so let's do that! 

    CG (2/18/06) – Is very interesting back at $23.25 as they have great options pricing.  The Sept $22.50 puts can be sold for $2.75 and that's great as a stand-alone play to net in for $19.75 but you can pair 5 short puts ($1,375) with 10 of the June $20 ($4)/22.50 ($2.10) bull call spreads at $1.90 ($1,900) and that puts you in the $2,500 spread for net $525 with a $1,975 (376% upside).  Let's add that to the OOP.  

    F (2/6/18) – Finally it's time to buy Ford and, since they pay an 0.60 dividend on a $10.47 stock, it's worth buying the stock so we'll add them to the OOP and the LTP:

    In the OOP:

    • Buy 1,500 shares F at $10.47 ($15,705) 
    • Sell 15 2020 $9.87 calls for $1.75 ($2,625) 
    • Sell 10 2020 $11.87 puts for $2.77 ($2,770) 

    That nets us into 1,500 shares of F at net $10,310 ($6.873) and it's a 50%(ish) profit if called away at $9.87 plus $1.20 in dividends is another 10+% so this simple trade is good for 30% per year and our worst case is owning 2,500 shares of F for $10,310 + $11,870 – $1,800 (dividends) would be net $20,380 or $8.152/share and, of course, if we don't want to own 2,500 shares at $8.152, why would we buy 1,500 shares for $10.47?  

    In the LTP:

    • Buy 3,000 shares F at $10.47 ($31,410) 
    • Sell 15 2020 $9.87 calls for $1.75 ($2,625) 
    • Sell 15 2020 $11.87 calls for $1 ($1,500) 
    • Sell 20 2020 $11.87 puts for $2.77 ($5,450)

    Here we're a bit more aggressive in the short calls but this portfolio is 5x bigger than the OOP, so there's little damage to us on the downside.  We're netting into 3,000 for $21,835 (7.278/share), not much more than the OOP and, if assigned 2,000 more at $11.87, we end up with 5,000 shares at $9.115 average, so there's the big risk compared to the OOP but we'll be collecting $3,600 in dividends as well.  


  51. StJL -  Your Beagles musical salute is complete, The Day of The Eagle?  With all these bots and panic in the air, somebody has to have fun, and Out.


  52. Big volume in the VXX Jan 19 100 calls. I am assuming sales. Have an order in now – we'll see what happens!


  53. Parade on Thursday Naybob… Got some space at the house!


  54. seer/anyone—is svxy going to trade today?


  55. Yes my system crashed completely and it came from this site. Good to know it wasn't just me!! First time that has happened. Right wing zing? Schumer is warning Trump. This could still blow sky low? when he gets indicted.


  56. TD is saying slow trading due to volativity in market. No kidding.


  57. Swings/StJ – Yes, if today's action isn't considered volatile, I don't know what is?

    SVXY/QC – They were not naked puts and we had 3x more put spreads than short puts – it just wasn't enough to cover this move.  Would have been fine(ish) if we'd layered the puts yesterday, as I noted to Winston but I thought we'd have a chance to make that decision today.  Who knows though, it's not even trading at the moment.  From the STP:

    Long Put SVXY 2018 15-JUN 140.00 PUT 20 1/19/2018 (0) $57,000 $28.50 $-28.50 n/a     $0.00 $-28.50 $-57,000 -100.0% $0
    Short Put SVXY 2018 15-JUN 110.00 PUT -20 1/19/2018 (0) $-30,800 $15.40 $-15.40     $0.00 $-15.40 $30,800 100.0% $0
    Short Put SVXY 2018 16-FEB 130.00 PUT -6 1/19/2018 (0) $-4,560 $7.60 $-7.60     $0.00 $-7.60 $4,560 100.0% $0

    Oh, those totals are screwed up because they stopped trading (so all 0 at the moment).

    TZA/Knight – There's not much to do with a July $9/12 spread as it's currently net $2.20 out of possible $3 and the 1/2 short April $15 calls will be rolled along if we have to but TZA only $13.31 – despite the correction, so not too likely we'll need to worry.  The July $9s are $4.50 and, if you want to be fancy, you can cash those and buy 2x the Jan $15 ($2.25)/$20 ($1.20) bull call spreads at $1.05 ($2.10) so net $3.40 in pocket and then you have your short July $12s double-covered with the long spread but it's too fancy for the OOP so we're just going to leave it as is and add a layer if we feel the need. 

    LB/Pstas – I guess we should get back in.  It would be nice if the Dow decides whether to be up or down 100 points for more than 2 minutes…

    Virus/Mkucs – Please send screen capture or description to Greg if you can (admin @ philstockworld dot com).  Thanks.  Oh, if feed the bull is blocked, we should probably remove them anyway – I think they are defunct. 

    SVXY/Jabob – No idea.  If they are smart, they will wait for VIX to go back to low 20s, which should undo a lot of the damage. A bit unethical though…


  58. SVXY – I think "they" are doing just that…. 


  59. Europe is closing down about 2.5%. Just a technical correction, no real panic. Now we’ll see how we trade without them.


  60. SVXY

    BETHESDA, Md.--(BUSINESS WIRE)-- ProShares, a premier provider of ETFs, announced today the performance on Monday of the ProShares Short VIX Short-Term Futures ETF (SVXY) was consistent with its objective and reflected the changes in the level of its underlying index. We expect the fund to be open for trading today and we intend to continue to manage the fund as usual.


  61. 11


  62. Swap: retail investor getting fucked….inverse ETF stopped trading. how to get out of the positions.

    Kinkster: wow Fidelity is SUPER SLOW.  I can't login, the page just stays loading.  I don't think its "people" since nobody can log in to their accounts.

    Pirati: Can't access TD. System is down. How convenient when I'm ready to cash out of my puts. TD is saying slow trading due to volativity in market.

    8800 Sunset Strip: You can call and they will enter orders and may waive comm  – if you smile at them.

    StJL – "I guess the spring was loaded and the bots simply created a huge chain reaction. How many people got killed trading futures on the Dow yesterday. You just can't react as fast as the bots and they make everything worse!"

    Phil - "Another reason to ALWAYS have hedges in place.  In major melt-downs, you can't even adjust your positions sometimes…. SVXY – "I think "they" are doing just that…. A bit unethical though."

    Spot on observations and Phil's advice is sage.   Getting investors in is like smearing peanut butter on a rollin log… Ah yes, the ubiquitous THEY gots ya, right where they wants ya… trapped like a rat.  Ya'll jump on in anytime now, ya hear, but no jumpin Out.


  63. SVXY – Waited till Europe's close… 11? hey, it's betta dan nuttin!


  64. Albo     APO  sold a few 2020 $28 puts for $3.8, and didnt expect it to fill at that price considering the bid/ask







  65. Phil/SVXY,

    good time to enter you SVXY BCS at this level? Of course if you are able to ….

    Why did TZA not moved much with this big move?

    Regards


  66. Stockbern – Don't really follow APO. 

    Did you pick that up from option activity ?


  67.  Albo/ sorry thought you owned some, no it wasnt from option activity

    I'm not in QUIK but noticed you could just buy the stock and sell the Aug. $2 puts and calls for a nice return.


  68. Why a Big Utility Is Embracing Wind and Solar




  69. US trade gap hits $566 billion in 2017, highest since 2008


  70. Virus is alive and well. Had to exit fast from desktop and am now on the wireless laptop.  Said all apps would be deleted from memory, back-up data now. That hasn't happened in a long time. Never a dull moment.


  71. Stockbern – QUIK reports next week on the 14th.  Don't expect much from the 4th quarter, but looking forward, expect a sharp ramp up in revenues.  Just wish the options were more liquid.


  72. Phil,

    I converted from SA to here but since I still have some time left in SA, I realised that you indicated the Official trade for OOP is only F. However, I saw your post for few other trades such as CG where you wrote, "let's add that to the OOP". 
    Just want to clarify as I'm still learning my way here, so is the rest of the trades just on watchlist or you too recommend it be added on.

    Thank you


  73. Phil/SVXY,

    back online and trading as the 115/90 Put spread is showing the last price as 25 but still my order for 25 is not getting executed. The last price is moving so there are orders getting executed. it is above 25 as well sometimes. What do you advise to get this executed?

    regards


  74. was looking at stocks this morning

    BX LTC PM MO ADM AGNC AHT GSK NLY VER VGR VTR XOM and PFE all good div payers any comments? or are you guys still under shock? As per Nattering yesterday's prediction.


  75. pirate investor do you use a VPN, I have one not sure how much it helps

    I was told it helps, its only $6 a month, and I can change country as I travel

     

    In Woodbury Minnesota I am going thru New York

    Hang in there (its going to 8 today)


  76. Yodi, overall a great list and time to start planting some trees, though you might be reaching for too much yield. Also, refine your list with dividend growers.   I could never figure out VGR.

    (NS says hi)


  77. Glad I usually read PSW on my tablet!


  78. SVXY – At the moment, I'm considering rolling our loss in SVXY to 50 short 2020 $10 puts at $5.45 as it can't be worse than where we are (collect $27,250 have to buy $50,000 if assigned for net $22,750 out of pocket) and hope it comes back a bit one day.  Not sure if it's worth the bother but no other way to recover from $11.50 though I suppose the 2020 $10 ($6.60)/20 ($5) bull call spreads at $1.60 will pay $8.40 (+525%) so we could just park $10K there without the downside risk or maybe a combination of both with just 20 short puts for $10,900 to pay for most of the spread and then upside at $20 would be $50,000ish.  I'm just worried that, in a normal market, SVXY will decay to zero over that much time.  

    TZA/Pat – It did move but was so low to start that 30% doesn't seem like a lot.

    CG/Dave – My bad, I forgot I said that.  I did mean to add CG to the OOP as well as it's a nice trade.  

    SVXY/Pat – If you have the SVXY June $115 puts, they look like $105.80 and the $90 puts look like $78 so net is $27.80 and fine if you can fill them separately but I want to under stand you are selling, not buying, right?  If you want to be fancy, you can just cash the $115 puts for $105.80 and hope for a bounce to get a better buy on the short $90 puts, maybe $72.50 or even $70 if the VIX calms down and SVXY pops back towards $20.  The downside risk isn't that bad since $78 for the $90 puts means only $12 more to $0.

    Dividend payers/Yodi – Good set of stocks, I have a lot of work to do on those and many others.  XOM appears to be toxic at the moment though.


  79. FU SVXY!!!!!!!!!!!!!!!!!!!!!!


  80. SPY   huge 13,000 lot of July $280 calls bought. 


  81. Thanks Phil some of them I still hold but most I closed at the big sale last week.

    Stockburn I feel these are some to start obviously you do have to do your own studies. I still left CIM and CHL out both I still hold and added.

    My gerneral feeling is sit on the side and wait, one sperow does not make a spring!!


  82. SCHW     3000 lot of 2020 $75 calls bought, on top of 8000 all ready in open interest, almost the maximum strike and max time frame


  83. QCMike, Up to this point I've been covered with no problems, but I have been using Chrome and think they might be the problem  The VPM's work, but I had trouble accessing accounts with all the firewalls etc. This is the first time I have had to shut down apparently through Phil's site as others were having problems too. 8 sounds like a heat wave-it was -14.9 this AM. Maybe the Ice caves will open being so blasted cold?


  84. Thanks Phil!


  85. In the STP, let's close the 20 June SVXY $140 puts for $130 ($260,000) and that gives us margin enough to cover the other puts, even at 100% margin ($220,000 for the $110 puts and $78,000 for the $130 puts) as we had $79,000 cash aside from that.  We're going to hope for a bounce before altering the trade but, as noted above, the 6 short Feb $130 puts at $119 ($71,400) can be rolled to 50 short 2020 $10 puts at $4.50 ($45,000) and, if we're assigned 5,000 at $10 – that's "just" $50K, so less margin. 

    I'm not worried about any of the short puts in the STP.

    In the STP, we have 20 short DIA Feb $257 puts, now $13 ($26,000) and we have 20 June $280/260 bear put spreads but the June $280 puts are $36 – way more than our spread.  The $260 puts are $19 so, what I want to do is cash the $280 puts in for $72,000 and roll the June $260 puts to the Feb $257 puts, so now we'll have 40 of those naked short.  We will cover those with 40 June $250 ($13)/$230 ($6) bear put spreads at $7 ($28,000) just to protect ourselves from a big sell-off but if all goes well, the short puts expire worthless and we recover most of the $28,000 leaving maybe $65,000 in our pocket off our initial net $22,200 investment.  

    Between that and the VIX though, we no longer have good hedges and we'll have to move fast if the market fails to hold those bounce lines.  


  86. OK it says failing hard disk. Replace the hard disk. Am backing up now. So this was a very bad attack if it totally corrupted the hard drive disk. Back  up completed but some files were skipped. I thought everything was in the cloud so back up seems redundant. If this ever gets done I have to create a system repair disc. unbelievable.


  87. Sorry you are having trouble, Pirate, we are removing that link.  I clicked on it and it just said "not secure" but better safe than sorry.


  88. Phil/SVXY

    I guess SVXY would go to infinity and not zero as the volatile normalizes. It is an inverse ETF. IF that is the case then the 2010 10/20 BCS for 1.60 is a good trade to enter?

    regards


  89. Phil, any thoughts on AMD. I look at their earnings seem very good and Dell announcing partnership with them… was thinking to set-up a trade


  90. SVXY is trading flatter than Kansas…. ;)

    http://www.usu.edu/geo/geomorph/kansas.html


  91. Stj/Phil/SVXY

    2020 30/50 BCS for 0.45? How is this trade?

    regards


  92. Phil

    Would it be a good idea to buy a BCS on SVXY recovering?

    Thanks


  93. Ray Dalio: Jan 24 – "If you’re holding cash, you’re going to feel pretty stupid" Bridgewater chief thinks the stock-market could see another surge and investors in cash will be left out.

    Ray Dalio: Feb 5 – "Cash on the sidelines will pour in to stem the bleeding in this market"

    Winston: Feb 6 - "Not feeling stupid at the moment, Ray", and Ray are you really giving me impartial advice?, or is there that little matter of a hedge fund you are talking up!


  94. SVXY – revenge trades are rarely a good idea.


  95. OOP Adjustments (just the ones worth doing):

    20 ABX 2020 $13 calls at $3.10 can be rolled to 20 ABX $10 calls at $4.70 for net $1.60.  That gives us $3 better position (in the money) and widens our spread.  

    With FNSR, we have 10 of the 2020 $17 ($5.70)/25 ($3.05) bull call spreads and let's close those and move them to $13 ($8)/20 ($4.50) bull call spreads at $3.50 so spending net 0.45 to narrow the spread by $1 but a $4 lower strike on the long calls.  While we're at it, let's add 10 more ($3,500) for 20 total spreads (still 10 short puts).  

    5 IMAX June $23 puts, now $4 ($2,000) can be rolled to 10 Sept $19 puts at $2.20 ($2,200) and, if we can pick up $4 in strike every 3 months, we'll be at $0 by 2020!  We have 15 Sept $19 ($3.20)/25 ($1.10) bull call spreads at $2.10 ($3,150) and we can roll that down to 20 of the Sept $15 ($5.80)/20 ($2.70) bull call spreads at $3.10 ($6,200).  Our initial outlay was $2,415 and now spending $2,850 so net $5,265 on what is now a $10,000 spread but mostly in the money now! 

    We began this trade on 1/3, when IMAX was up at $23 and now $19.70 yet we can still make almost a double at our much lower strike.  That's the beauty of using these options spreads – lots of ways to adjust along the way.

    NAK took a hit and we're down a lot, mostly because we didn't cover.  We have 5,000 shares at $1.06, down from $1.74 (-$3,400) and we also sold 2020 Jan $2 puts for 0.95, which obligates us to buy 5,000 more for $1.05 and are now trading at $1.08.  The 2020 $1 calls are 0.60 though, so let's buy 5,000 more shares for $1.06 ($5,300) and sell 50 of the 2020 $1 calls for 0.60 ($3,000) and that nets us into 5,000 more shares at net 0.46 to bring our average on 10,000 shares down to $1.10 ($11,000) less $4,750 collected on the short puts is net $6,250 (0.625/share) with 1/2 of our shares called away at $1 (50% profit) and sky's the limit on the other 5,000.  Still a speculative play but will be real fun if it pays off.    If not, we will own 5,000 more at $2 and average $1.083 on 15,000 shares (and then we'll sell more calls for 0.60!).

    SPWR is a victim of Trump Tariffs but the fear is overblown so we can roll the 30 2020 $7 calls at $2.60 ($7,800) down to 30 2020 $5 calls at $3.30 ($9,900) and that widens us to a $5/12 spread and puts us $2.14 in the money – so well worth it.  

    TZA – We'll have to scramble if we're wrong but if this 10% drop holds, we may as well cash our 50 long July $9 calls at $4.50 ($22,500) and put a stop on the last 25 of our short April $15 calls at $1.50 (now $1, which is a rip-off with TZA at $13.27) and, just in case, we'll pick up 50 of the Jan $15 ($2.40)/20 ($1.70) bull call spreads at 0.70 ($3,500) so we pocket net $19,000 and we'll hope the short July calls expire worthless and then we are left with a free $25,000 hedge (we paid net $3,250 originally).

    Those are all the adjustments for now and our premise is we're done selling at -10% and will work our way higher through Friday.  If that's not the case, we will quickly adjust our hedges (buying back the short Jan $20 calls for $8,500) would be a basic quick way to get much more bearish.  


  96. UVXY is up less than VXX % wise,…. crazy


  97. HMNY – Down sharply.


  98. SVXY / Pat – Not a bad risk reward! In a normal market, SVXY doesn't go to zero, it goes up so you have a chance. Basically a lottery ticket with better odds. The 20/30 BCS might be more realistic though. Still a 1000% possible return.


  99. Finally got my price $12 on the VXX Jan 19 100 calls. Good return on margin as long as the VIX doesn't double from here. In which case we would be in some trouble I imagine!


  100. HMNY ~~Helios & Matheson: Shares under selling pressure here; Company filed a Form D  to officially register its $60 mln convertible offering it had announced on January 11.

    Bought some at $7.34.


  101. Winston – talking up a hedge fund – indeed F Ray Dalio in the A. 

    Yodi – "As per Nattering yesterday's prediction"

    Tail end of 2015 into Q116, which is the last dip anyone NOT drinking the Kool-Aid remembers, was 13.2%.  Early 2017 was distorted due to the Donald and all that winning.  We are down 7.8% off the SP, so another 5% would be a damn good thing, just for starters because the winning is over, and the whining has just started.  And now your moment of Zen…

    BTW – for anyone paying attention, here's what already went over a cliff in December, not in any order of importance: M2, IBDD (interbank demand deposits), C&I loans, Reserve Bank Credit.  These are all proxies of systemic economic growth, which has NOTHING to do with the markets?

    Translated: money supply, interbank lending, commercial and industrial lending and credit from Fed reserve banks, all TANKED which means, ain't squat goin on my side of the street babe. The good news? Consumer savings is down, but consumer credit is up, gotta tread water and pay the bills somehow. Time for my IV and Out. 


  102. stjeanluc 

    was that the VXX Jan 19 100 calls  you sold ?

    Thanks


  103. If you were going to do a Jan 2019 BCS on SVXY what would it be?


  104. Phil – As we see turmoil here I was wondering if we should worry about the underlying economy. These idiots in Congress have put us in the path of $1T deficits again and we'll need to borrow even more than before with the difference that rates are going up so more expensive. Their othodoxy puts them in complete contradiction to what logic calls for – stimulate when the economy is bad and rates are low so that you borrow cheap! I understand that the plan is then to cut spending, but the danger there is a debt spiral because lower spending which we assume goes to lower income people carries a higher multiplier than the tax cuts to the 0.01%. So you inject $1T with a 0.5 multiplier and withdraw $2T with a 1.2 multiplier and borrow when rates are going up. I am trying to think what could go wrong with that!

    Paging Dr. Naybob as well!


  105. VXX / QC – Yes, sorry Jan 19! I'll correct the post.


  106. Wow, they got another penny out of Coffee today.  

    They rolled the contract so new one (/KCH8) is 0.2 higher than /KCJ8 was, which is a good long-term sign… 

    Dollar harshly rejected at 90.  

    Related image

    SVXY/Pat – If the VIX drops 50%, then 3x SVXY can only go up 150%.  Since it's now $11, that's only about $27.50 at VIX sub-20 and then, even back to 10 on the VIX, we're only taking about $65.  It's amazing it ever got to 140, actually.  Shows how relentlessly upbeat the rally was.  

    I'd say there's a good chance we get back to 20 over time as the VIX usually doesn't sustain these big moves BUT if the VIX goes to 20 (SVXY $27.50) and then back to 40 – SVXY goes from $27.50 to maybe $5 and THEN where are you?  So, if we are in for a prolonged period of market swings, this ETN can get ground down to zero by a few pops in the VIX like we had this week.  You'd be betting that doesn't happen for a year.  

    AMD/Dave – I always say they only live because INTC lets them (to avoid being called a monopoly).  Partnering with Dell is like partnering with AAPL – it sounds exciting but then you have no margins and demand that eats up your whole pipeline.  Not only that but you say "earnings" seem good and it seems to me like they earned $43M in 2017 and that's the first time since 2011 they made a profit yet, at $11.26, you are paying $11Bn for the company and 11,000 million divided by 43 million is 255 years before they can pay back your $11.26.  I guess we have different concepts of "very good"….  blush

    SVXY/Pat – See above.  Math is against you.

    SVXY/QC – See above and see my notes on STP – decided not to so far.  

    Revenge/Winston – Right you are!  

    HMNY/Albo – No news that I see other than raising some cash but what's wrong with that?

    SVXY/Tangled – I'd do the $10/20 as it's cheap with lots of upside but very speculative.  

    Turmoil/StJ – I don't think the underlying economy can be stopped.  People are working, wages are rising and next comes the hyperinflation which "no one will see coming".  There will be a lot of upheaval but, in the end, housing moves higher and the market moves higher simply because people will be charging more money for the same stuff.  

    Image result for hyperinflation

    Image result for hyperinflation flow chart

    Image result for hyperinflation flow chart

    It all works until it doesn't…


  107. In the meantime, SpaceX will try to land 3 boosters today… That would be insane!


  108. SVXY is not a triple leveraged fund Phil.

    it is supposed to do the opposite of VXX on a daily basis.

     

    until it got slaughtered last night


  109. This gives some perspective on the SVXY move yesterday:

    That VIX move was completely out of proportion with anything we had seen before.


  110. AMD/Phil I was looking at the 2 year revenue Q1 2018 at 70+%. Hmm I am glad I have another opinion to ponder on, I'm learning more today.  
    Regarding the trades or adjustments, it's common not to able to fill at the price you wrote at what is the buffer you recommend? Of course besides short covers if we are bullish, we can always put in an order and wait. 
    Thanks!


  111. Phil// I sold 5 FNSR 2019 Strike $25.00 Puts and I am losing money at $1715.00.  I'd like to know what my options are.


  112. Quick question for anyone, what do you see for bid/ask on the TZA July 9s?  I am using etrade pro, and like Dave suspect the executions are less than stellar.


  113. I always think about switching to TOS, but never do.


  114. Jabo is right, SVXY is -1x and is supposed to be about 1 month out.

    Fund Summary for SVXY

    PROSHARES SHORT VIX SHORT-TERM FUTURES

    ProShares Short VIX Short-Term Futures ETF seeks, on a daily basis, to provide investment results (before fees and expenses) that correspond to the inverse (-1x) of the performance of the S&P 500 VIX Short-Term Futures Index.


  115. But SVXY even at -1x can;t handle a +100% gain in the VIX; that is, it should've gone to zero, except for the fund's cash-on-hand that wasn't in the market (i.e., short VIX futures). However, if they held the instruments and weren't forced to liquidate, the "once in a lifetime" unprecedented VIX action will go back the other way, these huge VIX premiums will crash and SVXY might pop back to 70. What if the short contracts they re holding now expire worthless? SVXY could be back to 130.


  116. Phil/ when is the Aramco IPO scheduled to launch? Thanks 


  117. Saw this on SA  and happen to remember that AMZN owns 1.5M shares of AAWW.  Would make an interesting trade idea except AAWW options are thinly traded and only go out to August

    FDX

    FedEx and UPS fall after report of Amazon delivery push

    Fed (FDX -1.7%) and UPS (UPS -2.4%) are tracking lower after Capital Forum reports that Amazon (AMZN +1%) is considering a stronger move into parcel delivery.

    Amazon is reportedly asking shipping platforms to add it as an option alongside USPS, FedEx and UPS before the end of this year (per Bloomberg).


  118. StJL – "So you inject $1T with a 0.5 multiplier and withdraw $2T with a 1.2 multiplier and borrow when rates are going up. I am trying to think what could go wrong with that!"

    Nothing what so ever, so much "whinning" you will get sick of it.  You just have to do this. Back to my IV and Out.


  119. Phil,

    When time permits, please share your reasons for liking SEE.

    Checking the numbers, PE = 41, earnings have been rising (despite missing qrtrly estimates) but revenues have been declining YOY for past 5 yrs, P/S = healthy 1.7 but P/B = 14,D/E =705%, PEG = 4+. Agreed that their products should benefit from stronger economy especially online segment, but don't the above give you some pause?

    Thanks as always


  120. HMNY – Sold 1/2 up .50.


  121. StJ – do you recall our original SVXY bet?


  122. from Goldman:

    Following the sell-off, we recommend investors focus on Cyclicals, Low Labor Cost stocks, and Strong Balance Sheet firms.  We believe that each of these themes has dislocated from the underlying drivers during the past week. Rising inflation and interest rates should benefit cyclical sectors, such as Financials, relative to bond proxies. Our interest rate strategists forecast the 10-year US Treasury yield will reach 3% by year end. We expect higher interest rates will also represent a headwind to firms with Weak Balance Sheets  relative to Strong Balance Sheet stocks  given that leverage is near record levels. Firms with Low Labor Costs  will likely be most insulated from accelerating wages, a trend which our economists expect will persist through 2018. The median stock in our Low Labor Cost basket also trades at a lower P/E multiple (13x vs 18x) and is expected to grow earnings faster (18% vs. 14%) than the median stock in our High Labor Cost basket
     


  123. Bot SVXY 20 calls for march at 0.48. Just a gambling money that something weird happens and they shoot up. I'm out of the puts. That was a wild ride.


  124. SVXY/Jabob – Oh, never mind then.  In that case it's not going to make $20 very easily.  I always thought it was an ultra.  Sure moves like one!  

    Filling/Dave – I usually offer 5% lower and, if I think it's getting away, I'll pay 5% more for a leg but, logically, if you are filling multiple legs, then if you offer a low price in each direction – one of them WILL fill at some point and THEN you can get to work filling the other and, if you have too much trouble, at least you have one good price and maybe adjust the strike on the other.  If you are bullish, you can just fill the long side – though that's how we got in trouble on NAK, as the short calls never filled (but we easily filled the long stock and short puts!).  

    And, on AMD – their projections are off in fantasy land but would be cool if they pulled it off (unlike the past 10 years):

    Year End 30th Dec 2012 2013 2014 2015 2016 2017 2018E 2019E CAGR / Avg
    Revenue $m 5,422 5,299 5,506 3,991 4,272 5,329 6,081 6,596 -0.3%
    Operating Profit $m -1,060 102 -216 -481 -440 204      
    Net Profit $m -1,183 -83.0 -403 -660 -497 43.0 416 569.6  
    EPS Reported $ -1.60 -0.11 -0.52 -0.84 -0.60 0.041      
    EPS Normalised $ -1.51 -0.12 -0.22 -0.74 -0.62 0.005 0.37 0.50  
    EPS Growth %             +7,195 +32.6  
    PE Ratio x           2,260 31.0 23.4  
    PEG x           0.31 0.95 0.57
    Profitability

    But THIS time is different, right?

    FNSR/Rookie – Well the stock is at $18 and the Jan $25 puts are $8.35 so 5 is $4,175 and you say down $1,715 so I assume you sold them for $2,460 ($4.92) which is net $20.08.  If FNSR finishes at $18, you would be down $1,000.   The cheapest adjustment to make is to roll to the 2020 $22 puts, which are $7.70 and you'd have to sell 6 of those for an even roll but still far out of the money.  If you rolled down to the 2020 $17 puts, those are $4 so 10 of those but then obligation is to buy 1,000 at net $14.50 (less 1/2 the $4.92 you sold 5 for) which is 15% below the current price and net $14,500 vs 5 at $25 less $5 is net $10,000 so you trade 50% more cash obligation (for double the shares) at an $8 (30%) lower strike.

    Those are the trade-offs and they don't stop you from "losing" $1,715 – they just make it more likely you'll catch up but so will simply waiting and letting the $715 of the $1,715 that is premium burn off and then $2 higher and you'll be even on the trade by Jan.  They just popped 7% today – so I still like our chances.

    TZA/Knight – Actual executions today were $4.30, $4.10 and $4.15 (last).  The RUT went the wrong way since I made the call.  Well, it was the right way for our premise but a bit too fast to get a good price on the July $9s.  

    SVXY/BDC – I get the impression they somehow liquidate daily.  Hard to say what goes on there.  VIX Futures are crazy anyway, the March $15s are way in the money at $31 but only $7 – go figure…

    Aramco/DM – I think in Q3 but all up in the air still.  If they can't get $70 oil in the summer, it may get cancelled for this year but then more arrests will be made in Saudi Arabia as they have to shake the family down for more cash.

    AAWW/Stock – Well it's only about 1% of the company ($2Bn) so $20M is not a big deal investment and hard to say they'll suddenly compete with UPS ($95Bn) or FDX ($66Bn) as it will simply create 3 companies that lose money (and the Post Office).  Bezos should take over the USPS – that would work but he'd have to start saying nice things about Trump in the WaPo.

    SEE/8800 – 41?  I see $486M in 2016 but that was a one-time gain (selling division which caused drop in sales and earnings after) and usually they make about $250M with an $8Bn market cap so call it 32x but, going forward, they are on track to make $2.50/$44 share and that's 17.6 once they are done restructuring this year.  It's a nice, boring company that benefits from more shipping and notice we're selling just 5 $42 puts for $4 to net in at $38 – it's not like we're marrying it – I would just like to buy it if it gets 15% cheaper and, if not, I'll take $2,000 for my troubles.  

    Trump just said "I'd love to see a shutdown" – And the markets go up anyway.  Back to abnormal, I guess..


  125. Phil, do you think we will retest any lines on the downside here?


  126. Retest/Roamer – We've been falling for 7 sessions so 3 (1/2) to complete a bounce cycle.  On the Dow, 26,500 to 23,850 is 10% down and that's 2,650 points so call it 24,000 with 500-point bounces to 24,500 (check) and 25,000 has to be taken and held by Friday's close to stay bullish over the weekend.  If 24,500 (weak bounce) fails – then look out below!


  127. Bet / BDC – I sure do… The check is in the mail!


  128. ~~Markets near highs as lawmakers express optimism around 2 year spending deal .


  129. AMD/Phil that is indeed magic numbers but yeah I agree can't believe them so easily. I will sideline and watch them try and I guess it's never too late to get in the name IF they really come close.
     

    I realise you have tighten to spread of FNSR and IMAX alot… any reason? both are trading relatively close to the short calls.


  130. Reason/Dave – Because we can.  I'd rather spend a little more and have a $5,000 spread that will make $5,000 if the stock flatlines from here (very high probability) than a $3,000 spread that will make $7,000 if the stock goes up 25% from here (much lower probability).  

    Successful investing is about stringing together many years of 20% gains.  It's better to be consistent in your winning than making big wins.  That's one of the hardest things to get people to understand but nothing beats compound rate returns over time.  


  131. Phil – Amen to your last comment.


  132. Phil,

    Thanks for SEE reply and rationale. FYI, Fidelity has P/E at 41.18 (5 yr = 36), Nasdaq site, 24. 

    Market,of course, agrees with your analysis, straight up vertically in last hour. 


  133. stjeanluc 

    Did you sell  calls ?

    Sorry what was the trade  ?

    REF: was that the VXX Jan 19 100 calls  you sold ?

    Thanks


  134. AAWW is tricky Amazon warrants had a 37.50 strike price for up to 20% of the company, and I think the option of an additional 10%, not sure they executed them?  Also the agreement allows them to float some ridiculous number of shares.  

     

    I think the play would be for a takeover, but it seems to me the deal they have is to prevent someone else from trying to buy AAWW.  Not sure anyone really wants all the liabilities of an airline?

    I know the currant deal is to operate 20 767’s but they seem to be slow getting all 20 on line and flying.

    I know DHL owns a large amount of AAWW as well.  

    They also have a large stake of ATSG, which also has a similar Amazon deal, but also no volume.


  135. QC – Yes, I sold the calls! So sold the VXX Jan 19 100 calls for $12. They are at $9.50 or so now so a good trade. For now of course.


  136. I was curious what the actual bet was?


  137. Phil, you got me there… greed got the better of me. 

    Thanks for the reminder.


  138. HMNY – Sold last 1/2 of HMNY at 7.94, up 8%.

    Just trading around a core position.


  139. WPM – wrote a few Jan2019 $20 puts for 2.10


  140. Did I decide the selloff into the close yesterday was way overdone and take all my profits on shorts? Why yes, yes I did. Did I then decide to place a bet with some of those profits that we would bounce today? Yes, can't believe it but I did. Just patting myself on the back here. How sweet it is.


  141. …but will you give it all back tomorrow? Congrats, but be careful.  I don’t anyone is so sure why the market acted so violently.  You have to be cautious…or not?


  142. Not if I sell them today :)


  143. SEE/8800 – Scary when I send out those Top Trade Alerts (10:52).  

    AAWW/Knight – Logistically, they would be about 10 years away from mounting a serious threat to UPS/FDX and those two could merge if threatened that way.  I don't see the upside in AMZN making a play in shipping but, as a negotiating ploy – they are getting their money's worth.

    Coins/Albo – BitCoin back to $7,530.  Low was under $6,000 so good recovery but, on the whole, a weak bounce.  

    Speaking of weak bounces, that's all we have on the Dow so far – 200 more to go to hit the strong bounce at 25,000 so that's goal for tomorrow.

    Well played Mkucs!  

    Violence/DC – While it was severe, it certainly wasn't unexpected.  It's the 10% correction we expected and now the 2% bounce we expected off that 10% correction. What happens next, however, is a mystery – though from a value perspective, I think we should trade around this 2,650 line for a while to get the markets back in shape.


  144. Phil,

    Right you are Obe Won Kenobi (SEE)


  145. SpaceX side booster landings simultaneously was beautiful.


  146. What a change today in the money flow:


  147. Very cool Tangled, looks like we'll be leaving the planet at some point…


  148. Too late for me to leave, save yourselves.


  149. Musk should stick to spaceflight! These booster landings were just incredible. They detach 82 km in the air and land at the same time. I imagine that SpaceX must have a nice cost advantage being to reuse these boosters!


  150. CG- I do not know this company so took a quick look at it and fail to see what is the premise here other than good option pricing? They could be very good at what they do but frankly I don't know how I would describe their business and prospects to someone other than a generic "asset management ", whatever that may entail? 

    Perhaps you have greater insight? Also, they pay a dividend so that's a plus. 


  151. Trump to Be Briefed on Democratic Surveillance Memo









  152. XIV is going to terminate Feb 20th. Is SVXY?


  153. CS published XIV's NAV @ 4.20

    http://www.velocitysharesetns.com/xiv



  154. bio-- so why did SVXY have to suffer almost the same fate as XIV??


  155. I don't understand. It's a -1x daily fund. If the VIX goes up 100%, SVXY should go down 100%.


  156. Seriously?!

    “…Due to the recent increase in market volatility, E*TRADE raised its futures intraday margin requirement earlier today from 50% of exchange minimums to 100%.


  157. bio--it was supposed to be -1X the inverse of VXX not the VIX.

    Which makes it even more crazy that it dropped 80% AH yesterday.


  158. Good morning! 

    I got up because I noticed Dow down 176, which seems like a lot but not in context of these ultra-violent moves:

    Europe was holding us back yesterday and I think they aren't done selling US Equities is why we're down.  I'd play /TF long IF they get back over 1,500 – that's a good line, as is 6,600 on /NQ, 2,670 on /ES and 24,600 on /YM is more of a check-sum for the others – if all are above, play the laggard long (I'm going back to sleep, I have a Webinar).  Those are also good shorting lines as we go the other way into the EU open but hopefully we hold a 1% pullback – which is 250 points on the Dow (about 24,550).

    For their own trading, Europe looks to be opening up over 1%, but they are just catching up on our weak bounces from yesterday – don't mean a thing if we can't take the strong bounces and not good if the weak ones fail! 

    Nikkei had a terrible morning and China is heading into their Golden Week holiday, so people are selling – just in case and Shanghai is down 1.8% and Hang Seng down 0.7% but it's more like cautious selling into a holiday weekend's uncertainty at this point.  

    CG/Pstas – They are simply good money managers with a very reliable dividend and very good options pricing to play with so, when they are low in their channel, I like to pick them up for very high-probability gains and, if the position fails, I REALLY would like to own them cheaply and I love playing positions where my fallback is owning a dividend-paying stock for a low price.  There's no way they had a bad Q4, so expect an even bigger dividend to be declared and the only thing that can derail them is a warning about Q1 if they got caught with their pants down but, if not – then back over $25 pretty quickly. 

    I love how BitCoin is at $7,800 and people are acting like they are vindicated.  This is why we plot weak bounce lines – so we don't get sucked into a false rally – especially a bounce off the 200 dma!

    It's hard to say there's any support as it never really paused on the way up but let's assume $6,000 is right and $12,000 (50 dma by the time they bounce back to it – if ever) and $18,000 (top-ish) were the other major lines, then this fall is from $18,000 to $6,000 and that's $12,000 so $2,400-point bounce to $8,400 would be weak and $10,800 is strong.  Until we're over weak (which is the strong bounce from $12,000 to $6,000 as well) – there's no point in even looking at this thing.  

    Failing $8,400, the next test is that weak bounce off the lower channel is $1,200 up from $6,000 so if $7,200 fails – then it's a retest of $6,000 and likely consolidating for a move lower.  

    I still maintain my buy target at $1,000 but, even then, only for fun as I think there will be a lot of dip buyers down there so I'd buy 2x and sell 1x as soon as we're at $1,000 and stop 1/2 at $500 and otherwise see what happens with our free coins.


  159. If my blame China theory is correct, we should start turning back up around 4am (when they close).  Meanwhile, we're down 1% at 25,550, 2,666, 6,587.50 and 1,492 but very dangerous to play until we get our better bullish crosses. 


  160. Why Vacations Are Essential For Physics




  161. Billionaire doctor on verge of buying Los Angeles Times



  162. Trump Expected to Release Democratic Memo, but With Redactions


  163. Apple brings Alibaba-linked payment system into China stores amid market push



  164. Good Morning,  good comment in CCs.

    So,  assuming a weak bounce yesterday and today the best approach is ;

    1. wait and see

    2. rebalance  where ever is possible in the idea that downtrend is alive

    3. close de the puts shorts you buy it in the deep and run away.

    LOL, have a good day


  165. Good Morning   

    Phil, Been watching it all morning, amazing how you peg the lines.  If the indexes go up/down, would playing the laggard off the pivot point resistance/support lines be reasonable?   TIA

    Europe was holding us back yesterday and I think they aren't done selling US Equities is why we're down.  I'd play /TF long IF they get back over 1,500 – that's a good line, as is 6,600 on /NQ, 2,670 on /ES and 24,600 on /YM is more of a check-sum for the others – if all are above, play the laggard long (I'm going back to sleep, I have a Webinar).  Those are also good shorting lines as we go the other way into the EU open but hopefully we hold a 1% pullback – which is 250 points on the Dow (about 24,550).


  166. Well, that went about as expected so far, though it took longer than I thought but our lines held.

    That's it for the easy money, now we have to do some research to figure out the next move.

    • Stocks went on another roller coaster ride today but the major market indexes ended this trip with solid gains, as the notion that yesterday's rout was "a healthy selloff, not a harbinger of something worse" won the day.
    • The Dow Jones Industrials surged 2.3%, its best one-day percentage gain since January 2016 and recouping nearly half of yesterday's 1,175-point plunge, while the Nasdaq jumped 2.1% and the S&P 500 climbed 1.7%, ending near the top of very wide trading ranges.
    • Nine of the 11 S&P sectors finished higher, led by techs (+2.8%) with chipmakers showing particularly strength after Micron (+11.4%) raised its profit and sales guidance for the current quarter.
    • The consumer discretionary group (+2.5%) also was among the day's leaders, with GM surging 5.9% after reporting better than expected Q4 earnings and reaffirming 2018 guidance; Amazon, the group's largest component by market cap, rose 3.8%.
    • Possibly helping sentiment were reports that the U.S. Senate was nearing agreement on a two-year spending deal that would raise spending levels for both domestic and defense programs.
    • U.S. Treasury yields bounced back from overnight lows but still settled mostly lower, with the benchmark 10-year yield sliding 2 bps to 2.77% after tumbling as much as 14 bps overnight.
    • U.S. WTI crude oil fell 1.2% to $63.39/bbl.

    • U.S. stock index futures dropped over 1% overnight, pulling back from the roller coaster ride in the previous session that saw the DJIA close up 567 points following two major selloffs.
    • Some of the reasons given for the sharp swings include fears over interest rates, obscure volatility funds that use leverage and computer-driven trading.
    • World shares are looking to move away from the volatility, however, as equities claw back losses in Europe and Asia.
    • MBA Mortgage Applications
    • Composite Index: +0.7% vs. -2.6% last week.
    • Purchase Index: flat vs. -3.0%.
    • Refinance Index: +1.0% vs. -3.0%
    • 30 year mortgage rate at 4.50% vs. 4.41i%.

    Dow Swings Sharply, Finishes 2.3% HigherDow industrials change direction 29 times before finishing 567 points higher

    Buying the Dip Works Nicely, a 30-Year History of Routs ShowsAs the dust settles for now after the turmoil of the last few days, a chorus of buy-the-dip calls from fund managers and strategists is still ringing in equity investors’ ears. History suggests they have a point. An analysis by Schroders Plc of the 10 biggest one-day stock declines in the past 30 years showed the U.S. stock market returned about 25 percent on average in the following 12 months. For the following five-year period, average annual total returns were about 14 percent, according to the calculations.

    Fed’s Bullard tries to calm market’s inflation fears

    Chicago Vol-Selling Fund Blows Up, Down More Than 50% After "Significant Losses"

    White House Says Congress Must Accept Its Terms on ImmigrationChief of Staff John Kelly says he doubts the administration would extend the ‘Dreamers’ program beyond March 5 without a legislative fix.

    • Senate talks on a House budget bill were further complicated late Tuesday.
    • President Trump endorsed the idea of a government shutdown if lawmakers failed to reach a comprehensive immigration deal this week – something that was not previously considered a top priority in last-minute spending talks.
    • "If we don't get rid of [certain immigration enforcement] loopholes … if we don't change it, let's have a shutdown."
    • Following months of political uncertainty, German Chancellor Angela Merkel's conservatives have reached a coalition deal with the Social Democrats after elections in September failed to produce an overall majority for any party.
    • The CSU-CDU alliance will be given the economy and defense ministries, while the SPD was reported to have been given the finance ministry.
    • DAX +0.7% to 12,482.

    China Takes a Hard Look at Corporate Borrowers

    China strikes back against U.S. at WTO

    • China is pushing back against mounting trade pressure from the Trump administration, filing challenges to new U.S. tariffs on solar panels and washing machines at the World Trade Organization.
    • The petitions follow an announcement by the Chinese Commerce Ministry on Sunday that it was investigating American exporters of sorghum for allegedly "dumping" the grain below cost into the Chinese market.

     

    • "The United States of America will soon unveil the toughest and most aggressive round of economic sanctions on North Korea ever," Vice President Mike Pence said on his way to the Winter Olympics in South Korea.
    • "We will not allow North Korea to hide behind the Olympic banner… We will continue to isolate North Korea until it abandons its nuclear and ballistic missile program once and for all."

    Inside Wall Street's $8 Billion VIX Time Bomb. It was the hot trade on Wall Street, a seemingly sure thing that lulled everyone from hedge fund managers to small-time investors. Now newfangled investments linked to volatility in the stock market — until a few years ago, obscure niche products — have exploded in spectacular fashion. The shock waves have only just begun.

    U.S. crude supply fell 1.05M barrels last week, API says

    • The American Petroleum Institute reportedly shows a draw of 1.05M barrels of crude oil for the week ending Feb. 1 vs. last week's build of 3.23M barrels.
    • Gasoline reportedly shows a draw of 227K barrels and distillates show a build of 4.52M barrels.
    • Nymex March crude recently was $63.80/bbl in electronic trading, above today's $63.39 settlement price.
    • Barrick Gold (NYSE:ABX) says it expects to record a $429M pre-tax charge in Q4 as it reclassifies gold reserves at the stalled Pascua-Lama project in South America.
    • Chilean environmental regulators last month ordered ABX to close existing infrastructure on the Chilean side of the project, where the company had planned to develop an open pit mine; as a result, ABX is reclassifying Pascua-Lama’s 14M oz. of gold, which were based on an open pit mine plan, to measured and indicated resources – a mineral category with less certainty of being mined economically.
    • ABX says it has formed a working group with China's Shandong Gold to study a potential partnership at Pascua-Lama, building on an existing joint venture at the nearby Veladero mine.

    A self-driving truck just drove from Los Angeles to Jacksonville hauling refrigerators

    Soft toy demand impacts Hasbro in Q4

    • Hasbro (NASDAQ:HAS) says Q4 results were impacted by a slowdown in consumer demand in November and December.
    • "A decline in Partner Brands and Europe revenues resulted in us not meeting our fourth quarter revenue expectations. Looking ahead, our innovative lines are supported by robust storytelling and digital initiatives that position us well for 2018 and beyond," notes Hasbro CEO Brian Goldner.
    • Franchise Brands revenue rose 11% to $764M, while revenue fell in the Partner Brands (-21%), Hasbro Gaming (-4%) and Emerging Brands (-5%) segments.
    • Operating profit came in at 17.0% of sales vs. 15.7% a year ago.
    • Hasbro ended the quarter with $178M remaining on its share repurchase authorization.
    • Previously: Hasbro beats by $0.50, misses on revenue (Feb. 7)
    • Shares of Hasbro are down 4.18% premarket to $90.00.

    Wynn Resorts rallies after CEO exit

    • Analysts are weighing in on Wynn Resorts (NASDAQ:WYNN) after the resignation of founder Steve Wynn.
    • Citi says the development is unlikely to have a large impact on the casino operator's businsess, while Morgan Stanley sees a lingering overhang.
    • "Some investors might consider the resignation of Steve Wynn as the removal of an overhang on the stock, but we think that many uncertainties remain around who will be the controlling shareholders in future," observes Morgan analyst Praveen Choudhary.
    • Steve Wynn owns 11.8% of the shares of the company, while his ex-wife Elaine holds 9.4%.
    • Shares of Wynn are up 3.54% in premarket trading to $169.00.

    Report: Google to pay $2B for Chelsea Market building

    • Google (GOOGGOOGL) is about to double down on its investment in New York's Chelsea neighborhood with an acquisition of Chelsea Market for north of $2B, The Real Deal reports.
    • That would be biggest investment-sales deal in New York since HNA Group paid $2.2B for 245 Park Avenue last year in one of the highest-priced deals ever for a Manhattan office tower.
    • Chelsea Market offers 1.2M square feet and houses the eponymous food hall along with Major League Baseball and the Food Network.
    • At a $2B price Google would be paying more than $1,600 per square foot. It already leases 400,000 square feet, making it the building's largest tenant.
    • But it's been expanding with each lease expiration, and so could look to crowd out other corporate tenants (while keeping the retail component as is).

    And, from the WSJ – Just Wow!!  It really is time to get out of this country when this kind of crap gets peddled in the MSM:

    Democrats and FBI Abuses. In the 1970s, progressives stood up for civil libertiesToday they’ve reverted to the J. Edgar Hoover era.

    Even if it were true, the premise is "Yes, we should ignore Trump's collusion with Russia to manipulate a Presidential Election because due process may have been violated in going after a witness who, in fact, confessed to doing exactly what they thought he was doing." 

    Page, who has made his living as an energy consultant, has been open about his ties to Russia and Russians. Last week Time magazine reported that Page had described himself as a Kremlin adviser, and he subsequently made public the 2013 letter in which he made the comment.

    "Over the past half year, I have had the privilege to serve as an informal adviser to the staff of the Kremlin in preparation for their presidency of the G-20 Summit next month, where energy issues will be a prominent point on the agenda," the letter said.

    Page found his way to the Trump team via New York State Republican Party chairman Ed Cox, who said he knew Page from his volunteer work on the 2008 John McCain presidential campaign. Page became more widely known after Trump cited him by name during a March 2016 meeting with the Washington Post editorial board. By September 2016, controversy over his Russia ties had led the Trump team to disavow him, and he left his campaign role. The FBI surveillance of him began in October, according to the memo.

    I've been told October comes after September and that working with a Presidential Campaign in 2008 and THEN being recruited to work for the Russians and THEN going to work on another Presidential Campaign is a little bit suspicious.


  167. Phil/SVXY

    From the june 115/90 I closed the 115 put and was holding on to the short 90 puts and they got assigned to me overnight. but it is only 3 of them, so I have t assigned at 90 and the current price is 11.87. i sold the 115 puts for 103.63. So if i sell the SVXY at the current price i still net in $25 for the spread which is what i would have got is I would have closed the spread. Your advise please.

    regards