Top Trades for Tue, 19 Sep 2017 13:59 – TGT

OK, let's do a proper write-up on TGT for the OOP:

We're liking Target (TGT) because they are low in their channel, just under $60 and trading at a p/e of about 13.5, with no less than $4.30 in earnings expected this year and perhaps moving to $5 next year so that, in itself, makes them a bargain at $59.25.

In addition to the fact that fears of Amazon are overblown, Target is well-positioned to benefit from hurricane damage in Texas and Florida.  Millions of homes suffered damage and will need to go to the store to replace a lot of goods and TGT is a go-to place – especially when people are looking to save a bit of money.

Much more importantly, TGT has their grocery business and Millions of homes were without power for a week (some longer) and that means they have to throw out everything in their refrigerator and then they have to re-stock and that's huge business for the grocery stores.  

Florida has 137 TGT and "just" $69Bn total sales so 2M homes x $300 more than usual spent would be a 1% pop but in 1Q it's a 4% pop. Should be enough to get them back over $60 – especially as they have very low expectations this Q (0.86 vs $1.04 last year) and they beat last Q by 3.4% at $1.23 – so I think the estimates are way low.  

Not only that but ToysRUs is going BK and again, this is a place where TGT can fill a gap as they have extensive toy sections with a lot of the same things you used to find at ToysRUs.  Though the bankrupt ToysRUs can wage a price war, Target will have more pull with vendors to get the current toys kids want – just a cherry on top of the reasons we like them down here.  

In our LTP, we already have a play on TGT which looks like this:

Short Put 2019 18-JAN 57.50 PUT [TGT @ $59.26 $0.17] -10 4/7/2017 (486) $-10,600

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Top Trades for Thu, 14 Sep 2017 12:15 – OOP Review

Options Opportunity Portfolio Review (OOP):  It's been a quiet month, with just 3 new trades (XRT, MO, SCO) including one we just made today.   The last review was Aug 17th and we stood at $311,063 which was a pullback from our July 18th high of $325,753 so we decided to get more bullish and now we're back at $321,930 – up $10,867 for the month and up 221.9% overall in the first month of our 3rd year.  

We've been very conservative this summer and we're only using $43,500 of IRA margin – so no impact on our buying power, which is over $600,000 of ordinary margin.  That leaves us flexible enough to handle whatever the market throws our way going forward.

With North Korea threatening to nuke Japan and the US this morning, I'm back to being concerned as to whether we are covered well enough – in case of catastrophe.  No, I don't think he'll actually do it but we could end up with a Cuban Missile-like tension situation in Asia because Japan cannot let a threat like that go unanswered from their next-door neighbor – especially as Abe likes to present himself as strong on Defense.  

For those who are new, we transitioned this portfolio to more of a long-term portfolio as our first few months (back in Aug 2015) made us realize most people were not able to follow active trading due to the platform restrictions at SA.  We've moved towards a hybrid portfolio that mirrors the style of PSW's Long-Term/Short-Term paired portfolios, which relies on long-term positions, short-term premium selling and hedging to create a steady income stream.  

  • CHL – Right at the money and it will expire on Friday.
  • NLY – On track but a long way to go.  With the Fed next week, I prefer to take the money and run, rather than risk giving back our gains so let's kill this trade.  
  • WTW – Not worried about them at all, just waiting to collect our last $800.  
  • FXP – Our short China hedge failed for the summer.  May as well salvage what's left

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Top Trades for Thu, 14 Sep 2017 10:29 – SCO

FTR/Jabob – Only down 0.33 so far on paying an 0.60 dividend.  Happy to collect the money on our shares.  

  • U.S. crude oil hits $50/bbl for the first time in five weeks, extending yesterday's strong gainsafter forecasts for stronger oil demand by the International Energy Agency; energy stocks (XLE+1%) open strong as WTI currently +1.5% at $50.05/bbl after gaining 2.2% yesterday.
  • WTI popped above its 200-day moving average level of $49.55 earlier in the session, a level it had not breached on an intraday basis since Aug. 10.
  • Brent crude now +0.9% at $55.69/bbl for its highest since April, after rising 1.6% on Wednesday.
  • The gains followed an IEA report which raised its estimate of 2017 world oil demand growth to 1.6M bbl/day from 1.5M bbl/day.

SCO/JMD – Sure.  We can assume the nonsense will be over by Nov (but before Thanksgiving has another rally) and SCO is a good way to play that.  

In the OOP, let's add: 

  • Buy 20 SCO Nov $33 calls for $4 ($8,000) 
  • Sell 20 SCO Nov $39 calls for $1.80 ($3,600) 
  • Sell 10 SCO Nov $35 puts for $3 ($3,000) 

That's net $1,400 on the $12,000 spread that makes money as long as oil is under $50 in November.  Upside potential is $10,600 (757%) in 64 days.  That should pay for our Christmas shopping and also makes a nice market hedge. 

In the STP, let's do the same spread but with 50 bull call spreads and 25 short puts.  

Top Trades for Wed, 06 Sep 2017 08:19 – AAPL, IMAX, LB, WPM

Here's my agenda for Money Talk (BNN 7pm) tonight:

Apple (AAPL) was our Stock of the Year in 2013 ($55), 2014 ($75) and 2015 ($105) but we hit our $130 target so we moved on (WPM is our current Stock of the Year) but we do like Apple again as they are coming into another up cycle in sales, which should take them up over $180 by next year.  

Apple (AAPL), who usually give conservative guidance, indicated that they expect $52Bn in sales in Q3 (July, Aug, Sept – which is their Q4), presumably indicating a sales boost of the IPhone 8.  AAPL is very secretive but there is an event on Sept 12th and, generally, devices go on sale a week after they announce so Sept 17th makes sense, especially as the 5, 6 and 7 were all released in the 3rd week of September as well.  

This will end Apple's fiscal year with about $228Bn in sales and about $49Bn in profits and on track to hit $250Bn next year with $55Bn in profits which puts a $1Tn valuation ($195/share) firmly in reach as the p/e would be only 18 and, don't forget, AAPL is sitting on $250Bn in cash which, thanks to Trump, it's likely they will be able to bring home from overseas at a very low tax rate, which could lead to a massive dividend distribution or stock buyback.  

That being the case, we could play AAPL to certainly stay over $160 with the following spread:

  • Sell 10 AAPL 2019 $140 puts for $9.10 ($9,100) 
  • Buy 20 AAPL 2019 $150 calls for $25.30 ($50,600) 
  • Sell 20 AAPL 2019 $165 calls for $17.70 ($35,400) 

Your net cash outlay on the spread is $6,100 and the potential upside on the spread is $30,000 if AAPL is just over $165 on expiration day (Jan 18th, 2019) for a gain of $23,900 (392%).   Selling 10 puts obligates you to buy 1,000 shares of AAPL at $140 ($140,000) plus the $6,100 cash so $146.10 per share is a $16 discount (10%) to the current price as a worst case.  Ordinary margin on the puts is just $10,361 since it's far out of the money so the return on margin…
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Top Trades for Thu, 31 Aug 2017 13:36 – WSM

RH/Jet – Getting attractive but may get more so.  Their costs got out of control and ate their profits and, so far, there hasn't been any indication they've gotten things back on track.  $45 seems great at $1.5Bn but their best year was $91M in profits and you won't see that again until next decade so, unless they get back to $30, where we liked them, I'm not too interested in jumping in.

WSM at $46.16 ($4.6Bn) is more exciting to me as they have $5Bn in sales and $300M in profits so p/e 15 is already nice and they steadily grow it.  I wish they would spin off Pottery Barn but I guess it serves a purpose (get the college kids on the mailing list and upsell them).  

We don't have WSM so let's get back in in the LTP:

  • Sell 10 WSM 2019 $42.50 puts for $5.30 ($5,300) 
  • Buy 15 WSM 2019 $40 calls for $9.20 ($13,800) 
  • Sell 15 WSM 2019 $52.50 calls for $4 ($6,000) 

That's net $2,500 on the $11,250 spread so we have $8,750 (350%) upside potential at $52.50 and our worst case is owning 1,000 shares at net $45, which is about where it is now and that's aggressive but I really like the value down here – especially as a lot of people in Houston need furniture and furniture inventories are usually tight, which means there should be a nice drawdown over the next 6 months.  

Fed/Pharm – 2027 and they'll still have $2Tn?   As to Biotechs – LABU baby!  

  • Submitted on 2017/08/15 at 2:22 pm
  • LABU – I love them when they are cheap.  Let's spend $5 to roll the Dec $55 calls ($13.80) to the March $50 calls ($18.50) and DD (10 more) and sell 10 of the March $70 calls for $11.50 so we move from 10 $15 Dec spreads to 20 $20 spreads

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Top Trades for Wed, 30 Aug 2017 13:13 – MO

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

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

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

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

In the OOP:

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

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

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

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

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

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Top Trades for Thu, 24 Aug 2017 09:54 – XRT

Good morning!  

Oil took a nice, sharp dip after attempting $48.50 again – so internally weak.  

/RB made it all the way to $1.65 and that's that for that play.

Dow right at our shorting line (22,850) but need confirmation:

2,450 is the /ES line.

5,875 on /NQ

1,375 on /ES 

Dax over 12,250 is bullish so no bear plays if it's over:

And Eurostock 3,460 (since 3,500 is not going to happen):

Big Chart – RUT needs to get over 1,378.35 (200 dma) to prove things are turning up.   NYSE nees the 50 dma at 11,837 (20 away at the moment) and SPX needs 2,450 – same as the /ES line.  

I am batting 1,000 on penny stocks, check out GRNBF:

Speaking of penny stocks, the guys putting out GreenCoinX(sorry BDC) are actually listed as GRNBF, a penny stock trading at 0.184 at the moment (I have 20,000 – mentioned it a while ago).  The difference with GreenCoinX is that it's NOT anonymous and that means, MAYBE, they will have an easier time being accepted by Governments, which matters a lot in the 3rd World, where they are targeting their business as an on-line bank alternative.  Their limit is supposedly 200M coins and they are currently trading at $1.15 and GRNBF has 60M of them as an asset.  They charge no fees and don't make money on the use of the coin – just if the coin makes money. 

I may interview these guys in a week or two and

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Top Trades for Tue, 01 Aug 2017 11:32 – TEVA

TEVA/Lunar – Well, we recently got more aggressive on them, buying back the short calls and adding more short puts on 6/16.  

They have 1Bn shares so $32 is about $32Bn and they made $3Bn in 2014, $1.5Bn in 2015 and $330M last year but, going forward, they should be back on track as they just made $645M in Q1 (they are like AMZN, they can make money whenever they feel like it – except TEVA actually does feel like it sometimes) and if Q2 (8/3) proves Q1 wasn't a fluke (it wasn't), they should punch right over $35 so I wouldn't worry about your position.  In fact, I'd buy back the short $40s ($1.90) and then sell something else on the pop.  If they don't pop, then you can sell the $30s ($5.30) to some other sucker and use that money to roll to the $22.50s (now $10) so you'd be in a much lower spread for about the same money.

As a new play on TEVA, I would sell 5 2019 $30 puts for $4.20 ($2,100) and buy 10 of the 2019 $32.50 ($4.20)/$40 ($1.90) bull call spreads for $2.30 ($2,300) which would put you in the $7,500 spread for net $200 and worst case is you own 500 shares of TEVA for net $32.90 while best case is up $7,300 (3,650%) in 18 months.  

Let's add that to the OOP.


Top Trades for Fri, 28 Jul 2017 13:31 – LB

LB/Albo – Earnings are the 16th, you might want to wait.  We bought back the short caller so we have 10 2019 short $55 puts @ $11.75 and 20 long 2019 $45 calls @ $8 so net about $2 per long less whatever we made on the short calls so our target is $47+ but we don't make our full $20,000+ unless /LB is over $55 (because of the short puts, which we'll roll).  

So, bottom line is I still like the trade we have but, if you want to be more conservative, I'd sell 5 2019 $40 puts ($6 = $3,000) and buy 10 $40 ($9.40)/$50 ($4.80) bull call spreads @ $4.60 ($4,600) for net $1,600 on 10 ($1.60/long contract) and then at $50 you get $10,000 for an $8,400 (525%) profit.  

Worst case is you own 500 shares of LB for net $41.60 – still a 10% discount to the current price for a company making $3/share (p/e 15).  In fact, that's good enough to put in the OOP because who doesn't like to make 525% in 18 months?  


Top Trades for Wed, 26 Jul 2017 14:31 – F

For the OOP:

  • Buy 500 F for $11.03 ($5,515) 
  • Sell 5 F 2019 $10 calls for $1.63 ($815) 
  • Sell 5 F 2019 $10 puts for $1.02 ($510) 

That's net $8.38/9.19 ($4,190) and we're obligated to buy 500 more at $10 ($5,000).  The dividend is 0.60 ($300/yr) and, if we get called away at $10, that's another $1.62 ($810) profit so a nice 20%+ return on a stock you can pass on to your grandchildren.


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