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What Now Wednesday – Volatility Returns in Spades!

Now this is what I call trading!  

As you can see from the FactSet chart, we're about 5% below where I called for cashing out our Member Portfolios on December 5th (see "Tempting Tuesday – Stop Buying that Dip and GET OUT!!!").  At that time, I said the market was perhaps 20% overbought and, now that we've had a 5% rally and a 10% drop, I still think we're 5-10% overbought but I will concede 5% to better earnings and good global conditions (so far).  

At the time, our portfolios, after 4 years, were up 200-250% and we didn't want to risk our gains gambling on the holidays – as I expected what happened this week to happen in early January, not early February.  My timing was off but the call was right and we restarted our portfolios on Jan 2nd with 1/3 of what we took off the table and then we deployed less than half of that on new positions.  After getting off to a great start (up about 5%) they are all in the red but yesterday we took advantage of this 10% sell-off to press our longs and take some of our hedging profits off the table. 

We don't play our hedges to negate ALL downside damage – when you do that, you spend so much money on the hedges you can't make any money.  What we use hedges for is to MITIGATE the damage, so we don't lose too much on a dip.  All we need is some quick cash to put back into our long positions while they are low, like this adjustment to IMAX we made in our Options Opportunity Portfolio yesterday:

5 IMAX (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.

The original position cost us net $2,415 and would return $9,000 at $25 while our new position (using money we made on our hedges) now cost $5,265 and returns $10,000 at just $20 so, while our expectations of gains on cash have gone from $6,585 (272%) to $4,735 (90%), our chances of collecting the money have gone up tremendously (as a new trade it's net $4,000 to make $10,000 (150%)).  In any case, making 90% in 9 months is respectable – especially for a position we had to "save" after dropping 20% since we bought it!  As I said to our Members:

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. 

Congratulations to those of you who followed our Futures trading yesterday morning.   As we expected (and even charted for you!) 2,550 held on the S&P Futures (/ES) and we rallied up there past our 100-point expectations – all the way to 2,700, which was a fantastic $7,500 per contract winner on the Futures (every day this week!).  As I said yesterday morning:

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. 

This morning, we had a little dip and I put up a note in our Live Member Chat Room to play long as follows:

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.  

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. 

As you can see, 2,666 held perfectly on the S&P (/ES), giving us nice, quick $1,000 gain and NOW we are waiting and seeing what happens next because 2,685 is a bit below yesterday's close and today is all about holding that strong bounce line (see yesterday's notes) at 2,650.  On the whole, I'd rather if we consolidate here before even popping above 2,700 again as 2,850 was too high.  Hopefuly we can hang around 2,650 for a week or two and form a proper base before trying to move higher again – but traders are so impatient.

We are not traders, we are investors and we took advantage of yesterday's dip to press some of our longs and we even added 4 new positions – as they were just too good to pass up.  Today, we'll be looking for positive signs of consolidation and certainly we'll be doing a bit of bargain-hunting. 

We have a Live Trading Webinar at 1pm, EST and we'll do an extensive review of our Watch List, which has dozens of great trade set-ups, ready to go!  

 


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  1. ~~Phil/SVXY

    good morning

    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


  2. Good morning, All!

    Join us for the LIVE weekly webinar, today at 1pm!

    https://attendee.gotowebinar.com/register/4766301931159390979


  3. That's 2 1000 points or more candles in a row on the Dow! If you don't get wrecked day trading these futures (which I am sure many did on Monday), you can make a lot of money.


  4. Stephen Moore is such a hack – these guys just make up stuff about tax cuts paying for themselves and raising revenues all the time:

    https://www.motherjones.com/kevin-drum/2018/02/lets-stop-lying-about-money/

    Facts are, you raise revenues by raising taxes and eventually the deficit goes down! Revenues did increase under Reagan but inflation and population growth helped.

    In the 1980s, President Ronald Reagan chopped the highest personal income tax rate from the confiscatory 70% rate that he inherited when he entered office to 28% when he left office and the resulting economic burst caused federal tax receipts to almost precisely double: from $517 billion to $1,032 billion.

    This is wrong. Partly that’s because Moore didn’t even use figures from Reagan’s first and last years in office. But mainly it’s because he didn’t account for inflation or population growth. Once you do that, it turns out that federal tax receipts actually went up 14 percent on Reagan’s watch, or 1.7 percent per year:


  5. ~~ HMNY – Helios & Matheson highlights targeted promotions among its subscribers for a number of Oscar-nominated films — last week, MoviePass contributed 5.7% to the total nationwide box office . 


  6. Good Morning.


  7. Phil - BTW, searching your site with the internal search index or Google, for some odd reason, I cannot find reference to your "blame China" theory.  I assume this is in reference to falsity in their econometrics and raising debt to GDP till the cows come home.


  8. Good morning!  

    Rejected at 2,700 and 25,000 so far, which is good and healthy.  

    SVXY/Pat – OK, so you collected $105ish for your puts and now they put the stock to you for $90 and it's now $12.66 so you sell it and take the $77.34 loss and you're left with $27.66, which is more than you would have made on the spread – what's the problem there?  Nothing.   Now the short $115 puts are the disaster and they're not coming back.  Hopefully, you had a smaller proportion but, if they are Feb, they are now $102.50.

    I guess, to make back $102.50 on SVXY, I'd go for selling 4 (per $102.50) 2020 $10 puts at $4.50 ($18) and I'd buy 10 of the Jan $10 ($6)/$20 $2.50 bull call spreads for $3.50 ($35) and that's net $17 on a $100 spread so most of the money comes back if SVXY claws back to $20 by the year's end.  

    Not getting wrecked/StJ – I love how the Nas was almost 6,666.  Not like anyone does these things on purpose…  Now we'll just watch those 50 dmas and see if we can get back over them (and hold them). 

    Taxes/StJ – Not surprising. 

    HMNY/Albo – Coming back already.  It has all the markings of a very early NFLX yet, for some reason, no one wants to play.  

    China/Naybob – LOL, you are making it too complicated.  I had said above, in the same set of comments, that I thought China was being cautious going into their Golden Week holiday next week and that was why the Futures were selling off and why I expected to go back up after their markets closed. That's all I meant by that "China Theory".  

    The other stuff worries me too, but not today!


  9. So far so good. Holding my breath BUT I backed everything, did a repair of corrupted disc, so far so good. I started desktop in trepidation. That episode and the shut down of TD cost me a bundle yesterday as nothing could be executed. Seems strange that everything blows up all at the same time. Hanging in there and will try to recoup what I can. I'm never touching anything related to vix again. They pull this shut down crap all the time .I think it is Barclays,  vxx is anyway, and anything having to so with banks is suspect.


  10. What an idiot!  

    In the “old days,” when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!

    And, 

    Congratulations and on the successful launch. This achievement, along with ’s commercial and international partners, continues to show American ingenuity at its best!

    Musk is an immigrant, you moron!  And from ShitHole Africa too!  

    And this:

    We need a 21st century MERIT-BASED immigration system. Chain migration and the visa lottery are outdated programs that hurt our economic and national security.

    Wow, they make up definitions, slant them politically and then WhiteHouse.gov tweets it out and Trump retweets it.  This is how completely fake news becomes accepted by the right.  It's right out of Orwell's playbook.

    Image result for george orwell 1984 instruction manual


  11. Opps, disc problem again. Bye.


  12. Phil

    Do we have a trade on Twitter twtr 

    Thanks 


  13. Phil/TSLA- Is there an official trade on tsla short or would you suggest one now? Thx. 


  14. Phil – Ok no China Syndrome? Dim Sum caused this market dip? – on the 29th and yesterday we Nattered about increased net foreign holdings of dollar assets, and economic proxies tanking from December till present.  IMHO, some holders know this and Friday's BLS and MSM fake news exacerbated matters. 

    On Feb 2nd our jobs report with +200K read, the other part, +2.9% HOURLY wage increase, biggest since the recession, which never ended. So market inflation fears due to "healthy growth" are stoked, bonds sell off and yields rise. But wait, equities are selling off? I thought the growth in those tea leaves was healthy?  Something smells bad and Charley wants to have another look at that Tuna roll…

    200K is a weak number, as we need +300 or +400 to have meaningful growth. Further +2.9%  Yoy increase in HOURLY wages sounds nice, but might as well be fake news. Upon further review WEEKLY earnings growth rates have declined since Oct 2010, and are still below that level.

    Plotting WEEKLY earnings and hours confirms this and plotting HOURLY growth historically, drives the point painfully home. The peak of civilization was 1984 and we are in an emasculated impotent service economy wrought with Senior WalMart greeters and waitresses.  Would you like to Super Size that?

    How do hourly rates rise while weekly pay declines? Hourly rates increased due to minimum wage laws forcing them up, meanwhile due to benefit avoidance, employers have cut back on weekly hours or total hours worked. So sorry, next contestant.  

    Between the latent year end economic proxy data and that jobs report, somebody connected the dots, and saw through the BLS and MSM BS, thus making those dollar assets not look so attractive. Add in Chinese RMB at a 3.5 year high vs USD, good time to sell, if one is planning on devaluing the RMB again? With six you get eggroll? Sum Dim on the BLS report and Dim Sum for thought. Out.


  15. Phil, as you mentioned earlier this  morning, Steve Wynn resigned,  And as you predicted the stock is getting a strong bounce.


  16. Wow Pirate.  Maybe time for a new computer?  

    TWTR/QC – Hasn't been cheap so we didn't go back in and things look good there so maybe we never will.  They don't actually make money so I don't want to chase them for $20Bn but you can sell 2020 $22 puts for $3.50 and that nets you in for $18.50, which would be reasonable and 15% of the stock's price as a consolation if they never come down.

     

    TSLA/Ravi – Too nutty for me.   I like shorting them around $360 but missed the last pop and discipline tells me not to mess around in the middle – especially with earnings tomorrow.  

    Speaking of earnings, CMG got blasted down 10% on good earnings but it was because a price increase masked a decline in total traffic.  Of course, some would say the price increase CAUSED the decline in traffic but many people think that it's because their image is damaged just because they poisoned a few people.  

    We have CMG in the LTP and I still like the trade, though you could set it up a bit lower now.  

    Long Call 2020 17-JAN 280.00 CALL [CMG @ $272.12 $-32.21] 10 1/2/2018 (709) $63,000 $63.00 $-10.25 n/a     $52.75 - $-10,250 -16.3% $52,750
    Short Call 2020 17-JAN 310.00 CALL [CMG @ $272.12 $-32.21] -10 1/2/2018 (709) $-50,000 $50.00 $-9.30     $40.70 $-20.80 $9,300 18.6% $-40,700
    Short Put 2020 17-JAN 270.00 PUT [CMG @ $272.12 $-32.21] -5 1/2/2018 (709) $-17,600 $35.20 $6.50     $41.70 $5.10 $-3,250 -18.5% $-20,850
    Short Call 2018 16-MAR 310.00 CALL [CMG @ $272.12 $-32.21] -4 1/3/2018 (37) $-6,000 $15.00 $-12.73     $2.28 $-13.33 $5,090 84.8% $-910

    Good thing we sold the short calls – that kept us out of trouble.  It's too early to pull the trigger but the $310s we'll buy back and wait for a bounce to sell something else for $5-6,000.  If we do that every few months (just 30 days on this one), we'll pick up $20,000 per year as a bonus while we wait to see if we get $30,000 for the spread that was a $10,600 credit to start!  

    That's the sneaky way the LTP works over time.  It's a pretty simple trade with a high probability of success but we can work it into a $70,000 gain off a $10,000 credit over 2 years.  

    And we only sold 5 puts hitting us for $13,000 in margin.  The risk of assignment is $135,000 so 13.5% of our buying power but it's not a realistic risk.  What's the chances CMG falls below $200?  It's not nothing – look what SVXY just did – but realistically, I look at the risk at 500 x $70 (to $200) for $35,000 vs making maybe $80,000, so well worth it (and then we can roll the puts too!).

    Huge build in oil gives us whipsaw action.  Oil up 1.9Mb, Gasoline up 3.4Mb, Distillates up 3.9Mb – hard to spin a "strong" demand story from that!  Oh, and imports were down 538,000 a day so we were even shorted 3.5Mb and we STILL had these builds!  

    I like /NG long off $2.70 but quick money as it's snowing in NY but overall, the weather is mild for Feb.

    Right before inventories, this crossed the wire:

    • Crude oil prices pop higher on reports that he critical Forties pipeline in the North Sea has shut down following an unexpected closure of a feed control valve.
    • The pipeline, which handles ~45% of U.K. liquids production, was shut down for three weeks last December after a crack was discovered in an onshore section in Scotland.
    • Brent crude +1% at $67.54/bbl; U.S. WTI crude +0.7% at $63.82/bbl

    What manipulative BS!  


  17. Wages/Naybob – If you look closely, 2.8% of the 2.9% growth in wages went to MANAGEMENT wages, not the workers.  I saw it broken out over the weekend but didn't have a chance to post it.  

    WYNN/Albo – Next comes the name change.  That's gotta suck, having your whole legacy ripped away from you though, if those reports are true – he's a creep and deserves it – not to mention being a GOP fundraiser is a one-way ticket to Hell anyway…  cheeky

    Related image

    Image result for steve wynn trump cartoon


  18. WTW – Up huge. 

    Oprah power is crushing the shorts who look to be short about 35%of the float.


  19. Phil – "If you look closely, 2.8% of the 2.9% growth in wages went to MANAGEMENT wages, not the workers.  I saw it broken out over the weekend but didn't have a chance to post it. "

    Preachin to the choir, I did. For the BLS/MSM comparison to work you have to start apples to apples, and that's what I did on chart 1 and 2, with #2 proving that even with boss man included, its declining.  If you look closely, the 3rd and 4th charts I presented are for Production and Nonsupervisory Employees: Total Private, which excludes boss man.  Gotcha covered on both ends Brother Phil.

    "CMG got blasted down 10% on good earnings but it was because a price increase masked a decline in total traffic.  Of course, some would say the price increase CAUSED the decline in traffic but many people think that it's because their image is damaged just because they poisoned a few people."

    Much like an "increase" in hourly wage, masked a decline in total hours worked, and some people think the hourly increase will cause healthy inflation. HA!!!  As for the poisoning, thank you for my LMAO of the day and it brings this to mind. Gotta go check my IV and Out. 


  20. CTSH – Good Quarter overall with great guidance…   

    Cognizant Technology Solutions (NASDAQ:CTSH) trades up 1.1% premarket after Q4 results that beat EPS and revenue estimates.

    Upside Q1 guidance: Revenue, $3.88B to $3.92B (consensus: $3.88B); EPS, at least $1.04 (consensus: $1.01). 

    FY18 guidance: Revenue, $16B to $16.3B (consensus: $16.19B); EPS, at least $4.53 (consensus: $4.35).    

    Key metrics: Non-GAAP operating margin, 19.7%; cash and equivalents, $1.93B; total liabilities, $4.6B. 

    Tax reform impact: Recorded a one-time provisional income tax expense of $617M primarily due to repatriation tax that reduced GAAP diluted EPS by $1.04 during the quarter and year. Company expects overall corporate income ta rate to be approximately 24% for 2018 and 24% to 26% starting next year. 

    Earnings call is scheduled for 8 AM Eastern Time with a webcast available here


  21. Albo – " WTW – Up huge… Oprah power is crushing the shorts."

    Bad visual.


  22. Up 50% on the short VXX calls! Hoping for more volatility all year! And SVXY up 8% today. Gonna be a long road back. 


  23. NN you're too much. 8-)


  24. Interesting how much we're up and AAPL and IBM are still red. They could be holding those back for a big run up.


  25. HBI has earnings tomorrow – Phil any thoughts on this?


  26. Inflation/Naybob – I think that, but it takes time (years), not days.  Wages went up 37 days ago.

    CTSH/Batman – What a ride!  That's why they were fun in the Butterfly Portfolio – up and down in a channel.

    AAPL/Deano – I agree.  

    HBI/Batman – Well I hope they disappoint, so we can get back in.  Been waiting for them and LB to report and see who's a better deal after.

    Just to be clear, I like LB better than HBI – it's just that, by Thanksgiving, LB had already pooed and HBI didn't so I went with the one that was a better deal at the time but it was my intention that LB be the trade of the year and that's the one I'd prefer to replicate (still in the Money Talk portfolio).


  27. TSLA earnings/losses tonight


  28. Oil really taking a dive, down 2.5% and still looking weak.  

    Dollar is holding things back at the moment – which is great for me! 

    It's tempting to cash in but I don't see any reason we shouldn't get back to 92 and that's another $20K, so I'm going to hold out I think.


  29. Albo – "NN you're too much. 8-) "

    And that's what she said…. Most have forgotten… "the purpose of the economy is to serve society, not the other way round. A successful economy increases wages, employment and social stability. Reducing wages is a sign of failure. There is no glory in competing in a worldwide race to lower the standard of living of one's own nation."  – Sir James Goldsmith

    Should be Saint Goldsmith, required viewing and reading for those who really want to know the how and why? we are in our current trap, which is not by happenstance. Uber Prescient Interview 1994 - The Trap -  The Response.  When finished, you will need a strong IV and Out.


  30. SVXY NAV:

    Feb 6: 11.38, +187% (from day before)

    Feb 5: 3.96, -96%

    Feb 2: 103.74, -14%

    Feb 1: 120.61, +2%


  31. Wow, /NG turned up hard and fast.  $2.80 is the stop now, good for $1,000 per contract in two hours.  It's really not complicated – I look outside, see that it's snowing, see /NG is low in the channel and I bet that, when the NYMEX guys go out for lunch, it occurs to them that Winter isn't over and they should buy some /NG.  

    /RB is going to be the fresh horse but let's wait for the Webinar and see what's up (30 mins!).

    SVXY/BDC – That bastard thing killed our gains in the STP – fortunately we were bailed out by DIA and, even more fortunately, the LTP is already coming back or that could have sucked.  


  32. SVXY/Phil – interesting to note how well the market was able to predict the NAV. The NAV hit 3.96 but the shares only went as low as ~11 and the next day the NAV was 11.38. Some quants out there really earn their keep.


  33. ~~  Senate Majority Mitch McConnell confirms on Senate floor that Senate leadership has reached 2 year budget deal.

    Nice call on /NG.  Too bad we've lost most of the futures players. 



  34. All – I'm doing a grid storage startup. If you're not familiar with the importance of gird storage going forward, here's a primer.

    We are doing a brief friends and family round that is honestly a gift. The goal for the following round will be an A seed in the $25-50M range. You can email me at biodieselchris at gmail if interested. 

    It'll be the "Amazon" of grid storage, though that might be a "forward looking statement" as they say… ;)

    Phil – PSW investments?? :)


  35. If one has not, Hoisington and Hunt's six page Q4 is a good read discussing the consumer squeeze, lower wages, spending, over borrowing, M2, Fisher and declining velocity.


  36. Phil

     SVXY I am OTM about 10 k instead of rolling the feb 130 puts and sell other SVXY puts would I be better off to take the loss.

     And trade  something else to make up the 10 K and maybe reduce the risk.

     any ideas 


  37. XOM was a top pick at the PSW Las Vegas conference this time last year. It might be toxic – but had to have a sniff at the 2020 $65 puts at $4 – it may be dirty money but it pays the bills.


  38. Winston - "It might be toxic – but had to have a sniff at the 2020 $65 puts at $4 – it may be dirty money but it pays the bills."

    You tell it like it is.


  39. TNN – and you sir, are a gentleman.


  40. TLT sliding to the low


  41. Phil// With the interest rate hike expected at least 4 out of 8 Fed meetings, won't that keep the ABX down?  I know we have it in the new OOP.  Let me know why your thoughts on what will keep the ABX move up?  Thanks.


  42. Summary of the webinar:  "No, we will not sell GE.  We will  own more GE and more GE and, if they go lower, MORE GE!!!"  

    Made a nice $1,121 on /RB so not a waste of people's time:

    Perfect 5% Rule play.  

    Grid/BDC – Sure, we're happy to look at it.

    Thanks Naybob.

    SVXY/QC – I agree it's just annoying at this point.  If it's tying up cash and margin, just make $10K somewhere else.  Can I interest you in some GE?  cheeky

    Actually, I was still marveling at how crazy it is that you can sell a GNC $5 put for $2.60 and CLF 2020 $10 puts for $4 – they are just giving money away!  

    XOM/Winston – Was it?  I guess they were around $80 and we thought it was a good price.  They did spike up but then really fell apart, I don't like them now as a company but, for $78, they are a good deal.

    TLT/Stock – We got a warning of that during the Webinar.  10-year auction today went poorly.  

    ABX/Rookie – Yes, it will keep them down but this is too far down and, who cares if one day the Fed stops hiking and gold goes higher and ABX shoots up – don't you want to be there?  

    In the OOP, we have 20 2020 $10/20 bull call spreads at $3.55 ($7,100) and we sold 10 2020 $15 puts for $2.35 ($2,350) and, if ABX recovers by Jan 2020, we will get back $20,000 on our $4,750 outlay for a 300%+ gain in two years.  Perhaps it doesn't go up that fast.  Our break-even is $12.38 and ABX is at $13.40 and, if they are over it, we just set up for 2022 and, if we hit that, we have a 300% gain in 4 years.  If ABX is higher, we make 50%, 100%, 200% – whatever.  If ABX is lower, say $8, we lose $4.38 x 2,000 ($8,760) and we buy 40 of the 2022 $5/10 spreads for another $4,000 and now we're in the $20,000 spread for $12,760 and, if that hits, we make 57% in 4 years – a failure!  

    So I have to really, REALLY stretch my brain to find a way I'm not going to make 50% a year on ABX and, outside of bankruptcy, I can't even imagine not making 14% a year so why should I be afraid to play it?  


  43. Webinar – It's nice to make $$$ but it's NEVER a waste of time…. :)


  44. Phil, did you sell /RB or holding some until Friday? 


  45. XOM – Las Vegas. Referring to my notes I took at the 2017 PSW conference:

    "Oil is going to $60 in the summer. Look at XOM – good time to buy. Next couple of years good for XOM. XOM at $82.50 – sell the Jan 19 $80 put and buy the $70/$85 BCS."

    Other picks: CSIQ, SPWR, QCOM, AAPL, CTSH, LNG.


  46. Thanks 1020.

    /RB/Jeff – I have this problem when I make $1,000 in an hour – I tend to be satisfied and take it off the table…  Had it gone against me, I would have happily stuck with it through next weekend (holiday) but, since it was a quick $1,000 and since there's always something to trade tomorrow – I'm just using it for a nice dinner with the family tonight. 

    XOM/Winston – That was the logic but they haven't been able to convert higher oil prices to better profits so I've soured on them.  Those other picks were better.  Weren't we doing STWD or was that 2016?  

    Well that may have disappointed people but it was a healthy, flat day.  


  47. Phil — any interest in talking about TBT again?  That was a long time ago!


  48. How did the indicies just wipe out all their gains in the last 30 min of trading? Jeezsus!


  49. I think people are still trying to get out but not enough buyers to get rid of stuff.  Though SPY volume has been much heavier lately:

    Date Open High Low Close* Adj Close** Volume
    Feb 07, 2018 268.50 272.36 267.58 267.68 267.68 148,560,018
    Feb 06, 2018 259.94 269.70 258.70 269.13 269.13 344,620,700
    Feb 05, 2018 273.45 275.85 263.31 263.93 263.93 294,681,800
    Feb 02, 2018 280.08 280.23 275.41 275.45 275.45 173,174,800
    Feb 01, 2018 281.07 283.06 280.68 281.58 281.58 90,102,500
    Jan 31, 2018 282.73 283.30 280.68 281.90 281.90 108,364,800
    Jan 30, 2018 282.60 284.74 281.22 281.76 281.76 131,796,400
    Jan 29, 2018 285.93 286.43 284.50 284.68 284.68 90,118,300
    Jan 26, 2018 284.25 286.58 283.96 286.58 286.58 107,743,100
    Jan 25, 2018 284.16 284.27 282.40 283.30 283.30 84,587,300

    Same old story, the more they try to move, the lower the price goes.  

    TBT/Esco – We gave up on those, settled into always shorting TLT at around $130, which was very reliable.   Not sure we'll see that price again though.  

    I imagine TBT is a good bet going forward but so are TLT puts.


  50. TSLA staying up on earnings. The update letter is pretty much a puff piece with little detail. I suspect a lot will hinge on the call later today. One thing that struck me on the report is gross margins dropping in both the auto and energy businesses, in spite of higher sales. 


  51. Interesting finish on the Nasdaq:

    A big mistake I am sure and Obama's fault anyway!


  52. And S&P:

    We seem to be selling pops now!


  53. What a tool:

    https://talkingpointsmemo.com/livewire/pruitt-questions-whether-climate-change-is-necessarily-bad

    Scott Pruitt, the administrator of the Environmental Protection Agency, wondered aloud Tuesday whether climate change might actually be good for humans in the long run — a proposition unsupported by the conclusions of climate science.

    Isn't what we are already seeing worrisome? 


  54. TSLA/Jet – Well love him or hate him, this is way cool!

    I think it's safe to say that 25,000 mph is a speed record that will hold up for some time for electric cars…

    Tesla (TSLA) reported fourth-quarter earnings after the market close Wednesday that beat revenue and earnings estimates as it maintained production targets of its Model 3 sedan.

    Tesla said revenue was $3.29 billion, beating the consensus estimate of $3.28 billion. It reported a loss of $3.04 a share on an adjusted basis, beating the consensus estimate of a loss of $3.12 per share.

    The electric car-maker's shares were up 15%, near 348.60, during after-market hours on the stock market today.

    Tesla said it continues to target Model 3 production rate of 5,000 per week by the end of the second quarter.

    The loss isn't that bad, "only" $450M.  If they actually hit the production goals, it's perfectly acceptable.  I don't see it though, they delivered 1,500 model 3s for the Q and say that, in 90 days, they will be doing 2,500/week and 5,000/week by the end of June – seems very unlikely but he did put a car in space…

    Not only that but it seems like too many now.  Is there even demand for 1M cars?  What about the logistics of delivering 10x more cars per week – how can they possibly do that? 


  55. Like I said yesterday, Musk should stick to space where they seem to actually have things under control! And clearly a competitive advantages as well as a technology head start. The Russian company doesn't have a single private launch booked this year and they used to be quite busy. But even they can't compete and they had a string of incidents anyway. 


  56. Esco – I like TBT again finally. I'm in some shares (small), building out a call strategy this year for sure.

    Watching those two rockets land side by side was something else. Very cool.


  57. It might be TBT time soon but the decay is brutal and a lot of members got burned 10 years ago… Can't believe it's been that long already:

    TBT ProShares UltraShort 20+ Year Treasury monthly Stock Chart

    I had many posts then warning about the decay but it took a while to convince everybody.


  58. And listen to the supersonic boom when these boosters land:

    https://jalopnik.com/the-falcon-heavys-boosters-landings-made-twin-triple-so-1822794559


  59. StJ these short term instruments are much more interesting now having seen SVXY and XIV implode. They are based on a mathematical model, which, like broken roulette wheel, can expose serious vulnerabilities when they break. For example, SVXY was based on the boundary concerning the maximum move in the actual index wouldn't ever be 100% or greater (note that XIV was more sinister as it turns out CS may have had futures against their own 30% position in their own fund; how that is legal I have no idea). 

    With TBT, sure it's got the decay and, given the worldwide race to zero interest rate bonds (or negative rates), has gotten duly obliterated over the past 8-9 years. But back in 2009-2011 we had a different premise; we thought "if the governments around the world are going to issue debt/ZIRP/QE infinity, rates have to rise due to this supply." Well, that was wrong. They don't have to, even if they should have (or should be). Maybe there's a New Economy beyond fiat/manufacturing approximated by derivatives as I am fond of prognosticating, and maybe not, but regardless, there's still some uncertainty because nothing else the future is always uncertain. What if bond rates sharply readjust? Well that's what TBT is for. And like other short funds, TBT is based on a statistical model. What is that model? What happens near and/or outside the boundaries of the model?

    There's could be much to be gained here. A whole bunch of people are complaining SVXY was at 70 on 2/5 at the close but got obliterated after hours, and that is evidence of a monster scam where Big Boys get paid and retail guys get screwed. But the truth may be much simpler than that: the VIX had already gone up 100% during the trading day, so this was a known known. What may have happened is a significant market inefficiency existed that traders caught on to somewhat late: if the VIX went up 100% the NAV on SVXY should be 0. Or close to it. That's not a scam, it's the model of the fund. So why did SVXY close at 70? An astute trader could've sold SVXY at 70 and repurchased the next morning at 11 (no after hours purchases necessary even), or bought put options at 3:55 PM and made one of the biggest trades of the decade, short of bitcoin… ;)


  60. And the NAV was up again even with VXX up and UVXY up???

    http://www.proshares.com/funds/svxy.html


  61. Phil: GE

    You do realize you never adjusted your GE position in the LTP?  You started to, but got distracted in the webinar.  Not a big deal, but you do have uncovered calls.


  62. You know what I have, DC?  FAITH!  

    Fun fact, my cousin Simon did his cover art, they were good friends. 

    Anyway, I said we took a big hit on GE in the OOP (the LTP does have a cover) and I F'd up by not covering at the time but too late now (at $15) as the cover would do more harm than good at the moment.  However, like NAK, a cover can be useful to drastically reduce the cost of a DD – if we decide to go that way but, so far, we "only" have 2020 $15 calls and 10 short 2020 $20 puts.  

    Now, let's say we decide to give up on $20 (like IMAX at $25) and roll the 20 $15s ($3.10 = $6,200) to 40 of the $10s at $6.30 ($25,200) and then sell 40 15s to some other sucker ($12,400).  Then we'd be moving from 20 open calls that are out of the money (all premium) to 40 $5 spreads ($20,000) that are in the money and raising our cost from $3.90 ($7,800) to $14,400 so we'd make $5,600 (38%) at $15 and assume we'd be rolling the short puts to 2022 whatevers but they were $3,500 so, eventually, we'll make that too. 

    Not the worst outcome for a failed trade but, so far – FAITH!  

    That's why I will bang the table on stocks like GE – as long as they don't go BK – there are dozens of ways to squeeze a 20% annual profit out of them over time and what do I care if it takes one year or 5 years to make 20% a year on what I consider a "safe" allocation in the portfolio?

    They can't all be 300% winners and I tend to allocate large capital blocks to blue chips because they are very liquid and tend to come back over time and that's all we need – time!

    It's only the puts we really need to manage and, so far, we're obligated to buy 1,000 shares at $20 ($20,000) and we can roll the $20 puts at $5.50 to the $15 puts at $2.30 in 2020 and then roll those to 2022 $10s or at least $12s, which would net $10 on 20, which is the same $20,000 but now 2,000 shares. 

    Of course if GE plunges to $10 and still pays an 0.48 dividend, then that's 5% and maybe we'll take the assignment (ie, by back the puts and buy the stock), which puts us in for net $16.50 and then add 1,000 more at $10 to average $13.25 and then we're sell the 2020 $13 calls, now $4.30 for the price of the $18 calls, now $2 and that would drop our basis to $11.25 on 2,000 shares ($22,500) collecting $960 in dividends and THEN we can sell $10 puts for about $2.30 (price of the $15 puts now) and that drops out net to $8.95 with a $1.05 profit at $10 (11.7%) plus whatever dividends.

    That's what we can do if the stock drops another 33% over the next two years and, if they don't go to $5, we'll collect another $8,000 against our $17,900 position from more put and call selling plus dividends into 2022 and, if we get away with that sale, our basis on 2,000 shares is down to $9,000 and, from then on, we can easily make 40% a year selling puts and calls so again, 5 years from now, we end up with a great blue-chip income-producer. 

    I know it all seems speculative, which is why I kept the last LTP open for 4 years because that is exactly what we did with some trades that didn't work out initially but, most of the time, we work out of them and turn them into long-term positives.

    Year End 31st Dec 2011 2012 2013 2014 2015 2016 TTM 2017E 2018E CAGR / Avg
    Revenue $m 146,542 146,684 113,244 117,184 117,385 123,692 123,780 124,800 123,460 -3.3%
    Operating Profit $m 20,821 18,192 9,949 11,348 9,348 10,265 8,166     -13.2%
    Net Profit $m 14,151 13,641 13,058 15,233 -6,126 8,831 7,524 9,586 8,197 -9.0%
    EPS Reported $ 1.23 1.38 0.73 0.92 0.14 1.00 0.86     -4.1%
    EPS Normalised $ 1.23 1.38 0.73 0.92 0.25 1.25 1.13 1.10 0.96 +0.4%
    EPS Growth % +6.9 +12.3 -46.9 +25.9 -72.9 +401.1 -9.5 -12.4 -12.3  
    PE Ratio x           12.2 13.5 13.9 15.9  
    PEG x           n/a n/a n/a 1.69
    Profitability

    If people want to sell a company that's making $8Bn a year for $132Bn (p/e 16.5) during a restructuring – I just HAVE to buy it!  I don't know if you know this but it's HARD to make $8Bn – let alone do it every year and, in a good year, with these sales, GE has been known to make $15Bn (and once they lost $6Bn too).  I'm willing to give them the benefit of the doubt while they transition their business because – as I often say:

    If you're not going to buy low – when are you going to buy?

    I guess I should add to that that it's not too often that you get to buy low when things are going fantastic and the numbers look great.  Like any smart shopper, you have to know what a bargain looks like…


  63. Oh yeah, I got up because /RB hit $1.76 again, where I like it long but, in the Webinar, we had to DD at $1.755 to pull the avg to $1.775ish.



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  78. Phil/SI- Good Morning!

    Any thoughts on SI at 16.2?


  79. Good morning!  

    Yes, Ravi, I like /SI down here BUT I also like the Dollar for another 1.5% which will likely send /SI down 3%, or about 0.50 more, which is right back to nice support at $15.70 so, for now, I'd rather wait – tempting though it may be.

    Of course, while you wait, good old WPM is back on sale and I think $20 will end up holding though maybe $19 if /SI does fall back below $16.  Either way, it's like buying ABX, you get great leverage and the protection of a business that makes money if Silver doesn't come back quickly.

    We sold 10 2020 $22.50 puts in the LTP for $4 while we waited for a pullback (net $18.50) and they are now $4.85 and we're ready to add a bull call spread, so for the LTP, let's add 20 WPM 2020 $17.50 calls for $4.70 and sell 20 WPM 2020 $25 calls for $2.15 for net $2.55 ($5,100) and we sold the puts for $4,000 so now net $1,100 on the $15,000 spread

    In the OOP, let's add the following:

    • Sell 5 WPM 2020 $20 puts for $3.30 ($1,650) 
    • Buy 10 WPM 2020 $17.50 calls for $4.70 ($4,700) 
    • Sell 10 WPM 2020 $25 calls for $2.15 ($2,150) 

    That's net $900 on the $7,500 spread and the margin (ordinary) is only $1,000 so a very efficient trade that will make $6,600 (733%) if all goes well and our worst case is owning 500 shares of WPM for net $18.40 and, since we can then turn around and sell 2020 $17.50 calls for $4.70, collecting a 25.5% "dividend" while we wait – there's not much fear of a downside on this one.  

    My biggest problem with these trades is ONLY going with 5 short puts and 10 longs but, it's only a $100,000 portfolio – we forget that because we were up to $350,000 when we closed the last one out and we were making much bigger trades but we forget what it takes to build them from scratch so – PATIENCE!   

    BitCoin back to $8,500.

    /RB still $1.76, still a good long. 

    I hate to cheerlead trades but how many times have you heard us say that going long /RB into the weekend is the easiest way there is to make money?  Also, next weekend is a travel weekend and I super-doubt "THEY" will let us get away with sub-$1.80 gasoline.

    In fact, I'm going to fill up my car today (25 gals!).


  80. I also like /TF over 1,500 and /NQ over 6,600 and /NQ is lagging and likely to pop big if we get moving.  /YM 24,800 and /ES 2,675 will confirm and tight stops if 2 of the 3 fail to hold those lines!