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Monday, February 6, 2023

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Thank Jobs It’s Friday!

Do I know what the jobs data will be at 8:30?  Nope.

Then why would I title a post "Thank Jobs It's Friday!" – what if the report sucks and we go down?  Well, at this point, even if that does happen, I think that will be the end of it.  We've been building up to this "terrible" jobs number all week and we got a rotten ADP Report and a rotten Unemployment Report so everyone is expecting a rotten Non-Farm Payroll report.  When everyone expects the same thing, we like to bet against it.  Sometimes we're wrong and sometimes we're right but you make some amazing money when you are right.  The magnitude of the short squeeze that would follow a significantly BTE NFP Report could send up up 300 points or more on the day, likely with a big finish this afternoon and some follow-through on Tuesday as the rest of the world plays catch-up.

A bad report, on the other hand, is already baked into the cake and we have yet to test S&P 1,000 so we can expect support there.  It wouldn't be pleasant, but we should be able to scramble and protect ourselves if we head lower so the smart move is to play for the mega-move higher, and that's where we are.  Of course, it's also a balance issue.  In our last Weekly Wrap-Up, we had the following open trade ideas going into June 21st (we had gotten bearish at the end of the previous week):

  • APOL July $40 puts spread at .46, now .60 – up 30%
  • BBY Jan $37 puts sold for $4, now $3 – up 25%
  • BP July $30/32 bull call spread at $1, now .70 – down 30% 
  • YRCW at .21, now .15 – down 28%
  • BP Oct $33/July $33 ratio backspread (3:5) at net $225, now $524 – up 132%
  • TZA July $7 calls .08 (net of spread), now $1.50 – up 1,775%
  • SIRI 2012 $1 puts sold at .33, still .33 – even
  • USO July $33 puts at .51, now $1.08 – up 131%
  • GLL July $37 puts, sold for $1.30, now .35 – up 70%
  • TBT July $38 puts sold for $1, now $2.05 – down 105%
  • OIH June $104.10 puts at $2.02, now $8.70 – up 330%
  • TZA July $6/8 bull call spread for .55, now $1.48 – up 169%
  • TZA July $6 puts sold for .50, now .04 – up 92%  (pair trade) 
  • USO July $33 puts at .50, now $1.08 – up  136%
  • GLL July $37 puts sold for $1.40, now .35 – up 75%

These are all of our open short-term trades, which we published on June 19th and reflected our fairly bearish stance going into the next week (which was a turn-around from the prior week's bullish trades).  Our long-term trades are all well-hedged for a 20% market drop so we're hardly in a panic over this little shake.   People wonder why we would "flip flop" bullish so quickly and the answer is – BECAUSE WE CAN AFFORD TO!  As we make money on the bear side, we look for bullish opportunities to cover our gains.  It's a constant game of balance and you can't expect to understand our overall positions if you come in today and read a single article as they evolve over time.  This is why, the first assignment given out in our New Member's Guide is to have the Member go back and read the last 30 days of posts and comments – it is VERY dangerous to take this type of trading out of context!

So we've been getting more bullish all week long and we have cashed out the above short positions (adding a few new disaster hedges, of course) and added some now-painful longs but we have 2 weeks to turn it around in July and we remain confident until the jobs report proves the bear case that all hope is lost and we're heading into the Great Depression, Mark II.  We are no fools, of course – we have hedged for disaster as well.  On Tuesday morning, I felt so strongly about the need for protection that I not only published at TZA spread for protection (TZA July $6/7 bull call at .60, selling Aug $6 put for .48 is net .12 on $1 spread for a 733% upside) in the Morning Post but I also sent it out as a Special Alert to all members (even the Report Subscribers) AND I put it up on Seeking Alpha for my readers there AND I twittered it (which I almost never do) and, of course, put it on FaceBook for my friends, to help them protect themselves as well.  THAT's how positive I was on Tuesday morning that the market was going down! 

That trade is now up 475% but we got out at 500% because that's plenty of money to make in 2 days.  The AMAZING thing to me is that, 2 days after placing that trade, I find myself being branded a "perma-bear" because I've spent the last couple of days saying BUYBUYBUY while, well EVERYBODY ELSE, is saying SELLSELLSELL.  Yesterday, I laid out my buying premise for Members,which we also posted on Seeking Alpha, because I want my readers there to understand also why the tone has changed.  I won't get back into it now but I will say that I just call them as I see them and if we see 150,000 jobs lost this morning – I'm perfectly happy to rejoin the dark side but, until that time (just a half hour from now) I remain cautiously optimistic.

If you want someone who is always bullish or always bearish, I am not your guy.  My job is to find places where risk is mis-priced and take advantage of the fear and irrationality of the investing public.  We use options at PSW to both leverage our bets as well as to hedge them and it gives us the ability to take a dozen trades like the ones above.  

We had a massive strategy (and political) discussion in Member Chat already this morning and I say "thank jobs it's Friday" because I have spent 3 days now in a room full of bears, who all want to bet the market down and I have been very stingy with my downside trade ideas as I just don't believe in them so, finally, today is the day that I will either be vindicated if we hold our lows (the jobs report doesn't have to be good, just anticipated and priced in if bad) or I will finally come over to the dark side and we will ride this puppy down to 8,650

Either way, it's going to be fun!

8:30 Update:  Oh, how annoying!  It's 125,000 jobs lost, so nowhere near the doom and gloom predictions but also not enough to dissuade the bears, especially the all bear 3-ring circus on CNBC who are spinning every aspect of this report as far down as possible.  Unemployment is down to 9.5% from 9.7% in the prior report and the number includes 225,000 census workers that were laid off and the Private Sector ADDED 83,000 jobs but that is not at all what I'm hearing on TV at the moment.  I AM THRILLED as there is NO WAY that this number will take us lower than the lows we flipped bullish on this week.  They will now have to blow something up over the weekend (possible) to take the markets lower, despite all of CNBC's efforts.

Avalon's Peter Cardillo says: "If you axed government layoffs, it wouldn't be a bad reading. The basis of it is, the worst of the declines are over and we should be able to gain strength going forward."  I hope Peter is right because we sold a lot of puts at a pretty high VIX and we would be THRILLED just to flatline into July's options expiration (16th) – anything more than that is a bonus.  I don't think things are "all better" by a long shot but I do think they are getting better – VERY SLOWLY.  Good news for almost everyone reading this – Unemployment for people with a Bachelor's degree or higher is down to 4.4%.  High School dropouts are way up at 14.1% (but the best reading in a long time, down from 15% last month) and High School grads with no college up at 10.8% so, finally, a good reason to invest in a college education!  

Meanwhile, China revised their GDP UP, yes UP, that's UP, not the down that was being reported all week but UP to 9.1% from 8.7% because of higher contributions from secondary and tertiary industries.  That should mark the end of Doctor Copper's wild ride below $3.  Oil is at $72.50 and we're in on the futures above that line.  The USO $34 calls at .50 make a fun trade to to hold over the weekend, in case prices kick up but it is a high-risk position….  We get Factory Orders at 10am and Treasury's Alan Krueger will give the official spin on the jobs numbers at 10:30 and I'm sure he intends to spread some holiday cheer as the briefing is titled: "Pen and Pad Briefing on Employment Data and Economic Recovery" meaning he intends to be quotable for the weekend papers so we'll be looking for a lift around 10:30.  

Our FCX play should be a big winner and they are a great buy at $59 (we sold puts) as Australia backed off on their mining tax and are working out a compromise with the miners.  BP had some progress on their well and they are trading up in Europe (we're in that too) and Europe is trading up about 1% but down from 1.5% before our jobs number. Their initial reaction to our jobs number was a rally but then CNBC "explained" to them that the numbers were really awful.  Tune in this weekend when I plan to expose this scam from a new angle! 

So, we will see what we will see today.  I'm very excited as it would have sucked to have to run for covers in a pre-market crash, we're bound to get some short covering into the weekend and if we can pull an up 2% day out then we should get follow-through from Asia and Europe and we could be well over 10,000 again on Monday and what a relief that would be

Have a great weekend,

– Phil

 

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There is endless talk in the MSMa and liberal "think tanks" about the subject of ‘greed". This term has been used to conjure up emotion in the minds of the masses, to ostensibly place the blame of the recession on those that have made a sucess of their capital formation endeavors. The liberal left seems to believe that financial sucess is a synonym for "greed".  Is it "greedy" to make a financial sucess of your life, through the honest pursuit of profits and growth in your entrepreneurial efforts?  I do not think so. The leader of our country continually screams the word "greed" in his effort to create the largest divide  we have ever seen in our country. This endless political talk does nothing more than create a new level of class warfare, and does nothing to create jobs, new businesses or a betterment of our economy.  "Greed" in its correct definition is reprehensible behavior,  but lately the term has been used to describe even minimal desire to suceed in our normal day to day lives, to provide for ourselves. Even a guy today driving a nice car, or living in a nice house is now classified as "greedy".. What is wrong with this, if you earned your financial resources in an honest, hardworking endeavor? Our country’s values have changed – we now reward failure in the form of free benefits, and bastardize those that have pursued sucess, in the form of excessive taxation. ( end of weekend political editorial )

LoL Gel!!  You are truly a "Moth to a flame"!  I love the debates….. Carry On…. 🙂

Phil
This is what caused me to shut down our business in July 2001. Didn’t go BK didn’t even sell out inventory and September confirmed my expectations. Funny fact at that time the bad guys to us were Circut City and Radio Shack. CC went BK and the local RS store closed last year. That spring 2001 I tried to hire people with an plan to make them a licensed electrician but they wanted $25 per hour to be trained. I promised once licensed they would be paid $25 per hour or more and if that wasn’t enough they could start their own business and try to get 40 to 50 and pay all the fees and insurance. Two are in Jail, one grows and will go, 4 are hoping the paveing companies call them back and have no clue their unemployment is over, if I tried to tell them they would only tell me I am stupid. The others have disappeared or waiting for those construction jobs to come back. 85% of the houses in Teton County Idaho are empty most never sold. The conservative developer puppets blame intitlements and unfair taxes. My community unnamed but a ranch 0f I think 160 acres has 11 houses a doctor and I only full time residents, 5 for sale all over 2 years, 1 sold empty now started at 1.5 million sold for 615 thousand, a doctor, 2 lawyers, an 80,  and 67 year old are so underwater its not funny. Because I get SS Disability and now they think they deserve some of that free money they made up a bunch of lies about me told the conservative puppets at the sheriff dept. in Jackson I was a violent person. In Sept 08 armed with a search warrant tore up my house and took my guns. Now these people preach 2nd amendment rights won’t give them back even though all charges were dismissed, the prosecuter has twice told the sheriff to return all property, My lawyer who charges unreal amounts and is also the part time Federal Judge is about to file contempt of court charges on the sheriff. This is what Bush fear, that conservative lie, and are control freaks. I like to hear comments that disagree with me but I wonder if they are that stupid, sucker puppets supporting those .01%ers, or fools. I use myself as an example and proof because it is true and verifiable. I am also disabled and spending federal taxes because Big money and insurance companies spend 80% fighting claims. I would wager the conservative will not say a word about themselves, reveal who gave them all their money, and why they have to preach the lie. Without changes the 10,000 will be the only ones not begging and then they will pound their chests and say if it weren’t for me you would be dead.

In the Late 70’s as a land developer i started to hit the ceiling of 78% taxes.  It was not worth the risk.  So I scaled back.
In the early 80’s I had negative income.  No unemployment no government benefits.
In the 90’s I paid $400,000 (federal) on $1,000,000 of income.  People said that was an outrageous amount to pay in taxes.  I said I want to pay $400,000 every year because it means I am making $1,000,000.
The tax brackets are too low for the  rich now.  Like Phil says they are a black hole sucking up the wealth.
It is unconsionable that the financial industry makes 40% of the profits in this country generated by businesses.  They are a service industry and do little for the GNP of the country.  Then they rig the markets to boot.
I was a republican – now I will not vote for any person who is associated with a politcal party.  They are all corrupt.
The free trade treaty passed in the 90’s though good theoretically for the world sucked the manufacturing jobs and some service jobs out the country.  They will never come back.

If the rich man chooses to buy a brass fitting for his boat, does not someone have to make it, ship it, sell it, and in the case of the rich man, install it. You mock the frivolous expenditure as if it were meaningless, but it is not so much so for the man who works in his supply chain. Phil presumes that the misallocation of capital would be improved if only our all-knowing government could control things. Have you been paying attention to what our government chooses to spend money on?
 
Some of us just don’t buy it.

Holy Cow, Phil… somebody must have spiked your Bloddy Mary with too much Tabasco at the barbeque today. You really  are a tough opponent for me, in my defense of conservative thought. I must admit, I have been a staunch conservative since I was very young, as I always believed in the concept of self reliance. I was always befuddled by the injustice of system of wealth distribution, wherein those that inherited wealth were given such an advantageous advantage in life, but in most cases contributed very little. I grew up, as a youngster, in a neighborhood that was populated by many heirs to large fortunes. My family was sucessful, and I could never accept the fact that the wealthy (trust fund recipients) were so inept at most everything attempted to achieve, although, they had the advantage.
Fast forward to today…. I still feel the same. The more you give somebody for nothing, you will receive about the same in return. I know Phil you have been blessed in life with an extraordinary high level of inteligence, as well as a work ethic that is the envy of most, but I do believe your overly compasionate bias toward the unfortunate is jading your better judgement. I do not think it is beneficial to take from those that are the productive and give it to the less fortunate, just because they have chosen a path that ignores compensation for no effort.
You have mentioned on many occasions, the evil in the current system of distribution of wealth. So many who embrace the "liberal" philosophy, seem to feel that once somebody has reached a certain level of wealth accumulation, then they should not be entitled to more, notwithstanding they might deserve more because of their contribution, or I might add, whose business is it anyway to judge what a man needs? He might be the largest contributor in the world to causes that are beneficial to the less fortunate. (Gates, Buffett?). Or possibly this man might ve a visionary, and need the resources to do something that no one could imagine without a large amount of capital? I have two neighbors in Pebble Beach, that are decendants of some of the most wealthy entrepreneurs in the countrty’s history. One built the Union Pacific railway system, the other the Northern Paciific Railway. This too big capital, and without this available at the time. we might have spent much of our time riding donkeys over the area now covered by railway tracks.
Case in point relative to today…. should we have told Steve Jobs some time ago he "just has enough money"? Not at all. He was not "greedy"… he did not spend his wealth on personal stuff for himself – no he deployed his resources in order to bring to market some of the most beneficial products of our modern era. If the government confiscated his capital, then we might all be communicating on devices that do not meet our needs of today. So, Phil I can not agree with your thesis..
We must remember, more so today, in the year 1776, the US was given the greatest gift of promise ever – that was the freedom to pursue ones own entrepreneurial dreams in the form of free market capitalism, and I as a conservative believe this is what made the USA the most sucessful country in the world. For those that say, "ya, but you were greedy and you took more out than you should have"  Well, I completely disagree, as I have paid out over 50% of what I have earned to those that were in need. The balance was spent primarily on developing businesses that created jobs and manufactured products that have made life much bettet for the millions that were the beneficiaries of my effort. I am proud, and have no regrets.

Hey, 1020…. jump in… the water is fine. The result, in my case may be disappointing, but at least I can say " I tried to scale Mt Everest".  You will be up against the best (Phil).

gel1? we probably are more or less on the same side, and in the majority here. but Phil is LOUDER 🙂

Phil, I don’t think there’s any difference between a dollar going to buy brass fittings and a dollar given by the government to somebody. You might argue the brass fittings are an inferior use of the money, but the economic impact is statistically the same. I might argue that I don’t want you (or anyone else) to have the power to make that choice.
 
Speaking of boats, remember the luxury tax on new boats costing over $100,000? Remember how it was argued that, for heaven’s sake, the government needs the money to spend, and nobody needs a damn boat worth that much? At first reading, it was quite a popular populist idea.
 
Well, you will remember that boat sales crashed, and several long-standing manufacturers folded, and thousands lost their jobs. I wonder who remembers what the government did with the little money they collected from this idiotic tax? My point is simple. People with a lot of money have a lot of choices, and when you target a tax against them, it induces behavior you probably don’t want. And then, there’s the whole bit about freedom.
 
It is much better if an economy operates freely, don’t you think? I share many of your concerns, but I don’t think your methods would succeed as you intend. Remember when the government decided that home ownership was an american ideal? And when the government chose to take tax money and subsidize people in the purchase of the home. Remember recently when you built a pretty compelling case against home ownership, arguing that renting is better? I am not against home ownership, mind you, but I wonder how we all feel about the government subsidy?
 
I will always argue for a flat tax with a floor, all income treated equally, and possibly a surcharge over $1 million. That way the government loses its power for back-door subsidies.

As an afterthought, is anyone aware of any study done on the relationship between the mortgage interest deduction and home prices? I wonder if the home price bubbles since WW2 were stimulated by this.

I just love conspiracies. Everyone a victim- very egalitarian. Nameless and faceless mysterious evil doers stuffing ill-gotten plunder in hidden vaults. (Now there is an investment premise – who makes the vaults and security systems?)
Here’s a tip for anyone having trouble following along. You may have an old set of rabbit ear TV antennae in the basement or garage. Clip this to your tin foil hat for better reception. If you don’t have one, a wire coat hanger and some duct tape will do in a pinch. Most importantly, always check for overhead black helicopters before proceeding. THEY are always watching!
Meanwhile, enjoy your hot dogs and fireworks while you still can.
):

 I love the exchanges but Phil, no way can you pin this all on conservatives and/or republicans.  Democrats and liberals are as greedy, corrupt and irresponsible.  For every argument against the abuses of one side of the aisle, there is another stemming from the other side. 
One thing I do disagree with you on Obama’s taxes–no income tax increase for those who make less than 250K. Cap gains will go up and for everyone.  So there’s a tax increase for you.
How about what’s in the healthcare law:
-starting in 2013, medical expense deductions will only be allowed for expenses above 10% of AGI (2016 for those 65 years or older).
So 2 instances of tax increases for those who make below 250K.  One to take effect next year and the other 1 year Obama’s 1st term.  

Phil… this dialogue started with the beiief "geeed" is destroying our society. The conventional definition of greed is "excessive desire to acquire more than what we need or deserve". Well, with this definition in mind, when thinking who might be experiencing this "desire to acquire" in an excessive manner, one word comes immediately to mind – GOVERNMENT. I am talking about all levels of government today. No matter how much financial resources they strip from the economy, it is never enough, and furthermore, the amount that is collected on a current basis is but a miniscule amount compared to the funds borrowed, and unfunded committments in the future. It is insane!  Now that is greed in its purest form, as it meets the test "needs or deserves"
Do the governments deserve more of our resources when their ability to efficiently spend it is so blatently clear? A disaster at best!. They would not "need" near as much if it was not squandered.  I am not offering hollow rhetoric, as I have witnessed this first hand, having lived in Washington DC, and did business with the federal government at the highest levels, for over six years. Phil, you are familiar with DC…. have you ever in your life seen such a failure in the execution of social experiments. It is a massive embarassment to the idea our government can execute anything.
Our government has racheted its way to the top of the debt ladder, with no possible way to make repayment, other than the painful cure of hyperinflation. Same for the 48 out of 50 states, that are also insolvent. Our great leaders (economic geniuses) now want to solve the problem with TAXATION – not some, but lots. In addition to the monumental amount of new taxes scheduled for January, these ravenous hyenas are now talking about a VAT tax and even plan to tax all sales over the internet. This is NUTS. Do they not realize this plan will tank the economy on a permanent basis?  We don’t need more new taxes – we need new government, that understand a little about economics, and recognizes a free market entrepreneurial driven economy will get us out of this mess they have created.. The current administration has voiced their hate for the corporate infrastructure of our country and I personally believe they think the union movement is at the base of a solution to transform our corporate structure. I know they have very little understanding of economics, but also have never studied history, otherwise they would be on a totally different track.
If they are ignorant of historical data, then all they need to observe is the demise of Greece, wherein 43% of all of employed work for the government, leaving very few to financially support the "out of control" inneficient government budget. Biden and his wife should have taken their vacation in Greece instead of Iraq – they might have learned something.

Sometime in the 1950s, the New York Thruway was completed. Funding was largely federal, but a fair amount of state money was involved. Tolls were established to pay for construction,maintenance and improvement. By 1975 (or so) enough money was collected to pay off the state bonds used for construction – years ahead of schedule. They were not paid off. Years passed, toll revenue piled up, maintenance was deferred and bridges began to deteriorate. Toll rates were increased twice, long after all capital costs were repaid. Eventually, the tolls were nearly triple the required maintenance and improvement budget. The tolls were supposed to go away, but the state had become addicted to the revenue. Just another tax. There was talk of yet another toll increase.
 
I live in Florida now, where several bridges were built with bond issuance backed by toll revenue. Guess what? The bonds were paid off, and maintenance was deferred to the point that one bridge was not far from being declared unsafe. And the tolls were raised. The one defective bridge was replaced, but instead of taking the accumulated surplus from past toll collection (it turned out there was nothing left) they TRIPLED the toll to pay for it – by my figuring, the tolls are just shy of double what is actually required – this time, they PLANNED to steal the excess tolls.
 
My point? Phil may get his millionaire’s tax someday, and it may actually raise some money (although nowhere near what seemed likely at the time). Eventually, government will grow to like this extra revenue, only they will want more, so it will become a half-millionaire’s tax. No tax ever goes away, and if it changes at all, it grows and covers more people.
 
And all the problems we needed to spend money on will remain. Does anyone notice that governments at all levels do a crappy job?

jdub… The pledge Obama made to those that make $250,000 or less is total BS, and he knew it at the time. This was nothing more then populist pandering to get his 50% plus voting majority.  Politicians lie first, and everything else is secondary.  The coming VAT tax will impact the "less than 250" folks far more than the boys in the upper range, because on a percentage basis this tax will have an effect on all who purchase anything. The guy who has money invested in dividend paying stocks will see an increase, as this tax is slated for a double. (yes even those that make less than 250,000 have investments). The coming inflation (2011-2012) will hurt the lower income folks much worse than others. Inflation is a tax, as it is caused by poor management of government budgets. Lots of new taxes for EVERYONE are on the way. I guess Obama must have lied!

Barfinger… Your bridge statement applies to so many other scams the governments have created to raise money, but blow it in other ways.  Medicare is just one that comes to mind.  Bridges….. the Golden Gate bridge was finished in 1937 (73 years ago), and has been paid for over and over, however the tolls keep going up and up.  Most of the money winds up in the San Francisco general fund, and is spent on union pensions. Deception prevails!

Phil, I’m surprised to see you on the side of the little guys as I imagine you are well off. The disparity between the rich and the poor has become alarming, particularly in the past decade. Our government seems irrevocably corrupt, no matter who is in power the banks and elite get all the breaks and prosper more, while the average peasant (99.9% of the population) is hung out to dry. 
 
One of the problems in any society is the more money you have, the more power you have to earn more money which is squeezed out of those below you. Strong governance is needed to prevent this, and a high tax bracket can certainly help. I don’t buy the argument that rich people are visionary and doing great things in this country, on the contrary many behaviors the rich engage in to create more wealth and power are extremely destructive. 
 
Unfortunately all these taxes no matter who pays them, goes to a government that no longer serves the betterment of the country for all it’s people. The majority of taxes goes to illegal wars and paying interest on our massive debt. We have the constitutional authority to create our own legal tender, yet we have a private bank do it and we pay them interest on it, which eats up a huge chunk of tax receipts.
 
I don’t pay much in taxes because I am probably one of the poorest people here. But if I were well off paying more than half my income in taxes, I would be more outraged about how my tax dollars are being spent, rather than the fact that I’m paying so much in taxes. 

After many debates about what is the best economic system is for the country, and what is a fair way to tax the earners and non-earners, and additionally what dominance the government should have over our lives… in NY they would say "nuff already", and in the southern part of the country, they would say "no mas" to this discussion   I have to agree, as an consensus to solve this "great divide" is void of any possibility   Further commentary should be left to others, that believe this venue is appropriate for these "mind exercises", and are compelled to vent their opinions…. so I am out of the discussions going forward.  I will restrict my comments to only the subject matters that I feel will be beneficial to the PSW community, related to investment strategy.  My conservative views are deeply ingrained from my life experiences and educational background,  that can not be rewritten,  therefore my lack of ability to accept inverse opinions renders me unqualified as an objective participant, and therefore I should not engage further. Thanks to the many that support my opinions and the respect for the oblique from which I form my positions.

Happy Holiday Phil!    Since you are in the middle of this politics debate, I’m assume your mind is preoccupied with it, but I do have an investing question. We can deal with it later if you wish.
A week ago Chaps made an observation for possible buy/write, and you came back with a suggestion for synthetic buy/write:

chaps
June 25th, 2010 at 10:08 am | Permalink  
RIG: Jan 2012 50 P + Cs can be sold for about $28.50 as part of a buy-write on a $50 stock price.

RIG/Chaps – I’d go for the 2012 $40/65 bull call spread at $11 and sell the $35 puts for $7.60 for net $3.40 on the $25 spread and your worst case is you own RIG for net $38.40 (now $50.24) with a 635% upside at $65 and a BE at $43.40.  Your buy/write is good too.
I seem to remember you saying in a post several months ago that you don’t own a lot of stock, that you prefer to work with the options…. am I remembering correctly? Also, do you always look at both possibilities, the buy/write and the synthetic? And what parameters make you chose one over the other?
Couldn’t find anything about this in the archives, although I’ll bet it’s there. Thanks.

 Phil,
Turning away somewhat from the philosophical discussions that although interesting are unlikely to result in any kind of consensus, I would like to turn the subject towards a topic that in my opinion has profound consequences for our country. It has been neglected for generations and even now all we hear is lip service & platitudes. I speak of course about energy and our ever increasing dependence on others. Specifically, I’d like your take on the plan put forward by Boone Pickens which in essence proposes that we convert America’s 18 wheelers to run on liquefied natural gas in place of diesel.  According to Pickens this can be done within 7 years and would reduce our oil imports by 1/3 while improving our air quality and providing many thousands of new permanent jobs.  It is unlikely that this heavy duty segment of our transportation fleet will be running on any form of battery in the near future so to me this makes a lot of sense. What is your view?

Gel.
AMEN!

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