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Tuesday, February 27, 2024

$10KP and $25KP Review

I’m going to go over positions in the two small virtual portfolios in detail.

I’ve decided to shut down the Dow Virtual Portfolio because, frankly, it’s just too dull so, as long as no one is really broken up about it, I’d rather concentrate on other things.  I will also be attempting to purget the STP as it’s gotten too big as there are simply too many good things to trade but now it’s taking me too long to scan through them in a busy market.

That leaves complex spreads, which is essentially the Great Google Virtual Portfolio now (I have an insane amount of money on Google) and that doesn’t look like it will change this decade as my callers and I will be stuck with each other for quite a while as I look for a way to pay off my Nov $620 callers!  I’m not complaining, my main position is 40 Jan 590s that have a basis of $21 from way back on 9/19 (and those were a 2x roll from an earlier position!) and a lot of the tightness to my various callers was aimed at protecting this (as of yesterday) $205,000 position.  My direct sale against them was a risky Oct $630s at $25 so I’ll be saying goodbye to this whole position today, which will give me plenty of cash to adjust the other 70 Google calls I have.


CAKE (10/23) – I simply don’t buy the drop but I don’t want to go naked into earnings as we’ve already lost $1 on this play so my solution is to DD with 10 more Jan $22.50s at $2.05 and sell 15 Nov $22.50s for $1.50+ which gives us a nice cushion but let’s scale into selling the Novembers in case we get a run today (assuming the market is holding up).

HMY (10/31) – Earnings estimates have gone from .11 to -.04 for the quarter since the mine closing and next quarter has been marked down from .13 to -.01.  Expectations for the year (this is Q2 of FY ’08) have dropped from .92 to .32 and expectations for next year are halved at .57.  The company has dropped from $15 to $9.50 since beating revenues by 13% last quarter (earnings, or losses were in-line).  For $3.86Bn I have a call in to Icahn to chip in with me and buy this company, which pulled $1.3Bn worth of gold out of the ground last year (at $615 avg per ounce).  If it doesn’t bounce back on earnings (outlook being key)  then I will be loading up on the stock at $9.65 and selling $10s (Nov $10s are .50) for a nice 5% monthly return while I wait for it to come back or for the inevitable buy-out.

INFY – We sold 6/10 calls against and I wish it was 10/10 but c’est la vie.  As planned, our caller is wiped out of their entire $1.80 (-$1,070) leaving us with 10 Nov $55s that cost us a net of $140 (now worth $600).  If the stock can’t hold $50, there’s no reason to ride this out but I’m willing to give it the weekend to see if $50 is just a pin as I was quite happy with their earnings.

OXPS (10/23) – ETFC did poorly but they suck so I’m not really willing to concede defeat on OXPS over that.  These also look like a pin at $27.50 and we knew this was an earnigns gamble going in so no change of plan here other than DD at .45 if we can to fill out our goal.

SHLD (11/30?) – We sold 3/4 Nov $135s against our Mar $140s on the premise that earnings would come after expiration.  So far so good.

FNF (10/24) – Very low expectations are why we’re in this one.  Our caller is dropping our basis to .50 and then it’s an earnings/outlook gamble but I’m a little less enthusiastic about housing so, if we can get .65+ pre earnings let’s take at least 1/2 and run!

MSFT (10/25) – XBox sales are tearing it up!  Sing it Steve!   Literally Bill Gates gave the company to his doofy roommate because he got him laid in college and kept Bill from getting beaten up for being such a geek (even by Harvard standards), what luck!  As Reinharden said in yesterday’s comments:

"MSFT may not be what it once was. But at the end of the day, they’re handed $50 to $100 for 90+% of the computers that ship around the world. And their marginal cost of goods sold for their OEM relationships is exactly zero. It’s really had to overly dislike a company who has revenue of $50B and gross profit of $40B. ;-)

Although I do try…"

That’s right, they are evil, they are manipulative, they are known violators of international laws of fair competition, they are the Haliburton of techland…  BUYBUYBUY!  Our caller came out even and we’re going to keep ourselves covered by rolling to the Nov $30s as we have lots of time on our hands (and we did gain the .50 premium from Oct).  That puts us in a no lose into earnings as we’ve collected $2.12 against our $1.80 position with 4 months to go.

MTB – They beat on revenues and took some adjustments that made them miss earnings by a dime (5%).  There’s been no change of guidance and they should hold $97.50 so I’m up for a DD at .90 (our adjusted basis is $2)  and half back out at $1.50 on the first bounce.

NEM (10/31) – My only concern here is that our $47.50 callers will end the day in the money.  We are golden on this trade with our caller eating .85 of our $1.40 entry cost and I have NO DOUBTS about holding these guys through earnings with gold up 20% from last year, NEM being almost 100% unhedged (they took a hit last Q to buy out their hedges) and $5Bn of 2006 revenues bringing in $800M in net profits.   19 analysts think they will earn just .26 a share but they underestimated last Q by 14.3% and then LOWERED their outlook for Q3, which includes September where gold ran up.  This company has 4 sells, 10 holds and 5 buys, that’s rocket fuel if either gold breaks $800 OR they beat low expectations.  Obviously, I’m going naked into earnings here!

The Jan ’10 $50s are $8.95 so I’m initiating 10 in the LTP for a start and will DD if they go lower, also naked into earnings.

NFLX (10/22) – Damn we got hosed selling the November calls, I didn’t think they would pop so soon.  They are $1 ahead of us so let’s roll them up to 2x the Nov $22.50s at $2.55 ($.60 to us) and buy ourselves another 5 Jan $22.50s at $3.15 (net cost $2.55).

PFE (yesterday) – The quarter was good but they took a $2.8Bn charge on Exubera, which was supposed to be a blockbuster.  Great for us, we sold calls and we’re in March $25s for a net basis of .65 – I can live with that!  I say wait until next week on this one as they only killed Exubera because it was dragging them down and they have better things to do.

T (10/23) – Ooh the IPhone factor…  Well Apple (10/22) went through the roof and then broke through the roof that was covering that, hit the ceIling and broke through that too while T has been dead flat into earnings.  Since this was our evil plan all along our poor caller gets nada and we have an adjusted basis of $1.15 on the Apr $45s.  Analysts haven’t even raised their current or future expectations on this company since the IPhone rolled out and I liked them long before they hooked up with Apple, that was just gravy for us.  I’m looking for a "halo" effect from the IPhone that should bring in subscribers and I’m willing to risk earnings without a cover (unless we get some silly run-up that we want to lock in).  If we sell, it will be 1/2 the Jan $42.50, currently $1.80, which will reduce our basis to $0 (but with a $2.50 spread).

LVS (11/1?) – Shelly, Shelly, Shelly.  What a scam this is!  Well, as I always say, we don’t mind a scam as long as we know what the scam is.  We need to keep tight stops on our putter but, now that we’re ahead we can roll our $4 Oct $135 puts to 1/2 the Nov $125 puts at $5.70 while we wait and see.  I’m tempted to take a much larger position in our other virtual portfolios as the net of the Jan $135/Nov $125 put spread is just $9.25, letting us enjoy a $10 move in either direction but I’m thinking the emperor has no clothes and we may see $100 after earnings.  We’ll be keeping an eye on the Nov $115 puts as a mo play if they break $130 to the downside.

TSO (11/1) – I will drink the gasoline if these guys have a good quarter!  We sold the Nov $50 puts and they are holding their value so far, despite the stock climbing while our puts have dropped 20%.  Let’s add 5 more at $3.60.


We’re in great shape here as the $10KP has as much cash as the $25KP so we can make the same moves with no problem. 

All the same as above except our gamble from yesterday on the SU $105 puts at .60, they expire today so we’re just hoping to get our money back and, by noon, we will be thrilled to get .15 back.

OK, no morning post today as we have to get ready for the great googly moogly trade – looking strong so far and this will be one wild open.  I’m tempted to layer in a strangle and I will be buying calls as it tops out my callers and the cost should be low enough relative to my deep in the money callers that I could care less if it goes down.  Only if GOOG breaks $650 will I consider pressing the puts (but I would buy $650 puts for $2 before lunch, just for fun).

Have a very Googly day!

– Phil




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