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Saturday, December 3, 2022

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Try and Try Again Tuesday – 3 More Trade Ideas That Make 300% if the Market Pops

Here we go again (again)!

Yep, that's what I said last Tuesday and the Tuesday before that because Tuesday is a day they push the Futures higher and ditch the Dollar and tell you that this time it's different because of the same rumors they had the Tuesday before only this week – the data is getting worse and worse, as we know is better, right?  

Last Tuesday we set levels to capitulate and go fully bullish at Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816 and, as of yesterday's close we had the Nasdaq and the Russell over their marks needing just one confirmation to make it 3 of 5 and begin to flip our short-term portfolios (the $25KPs) bullish.  We are soooo close but, so far – no cigar.  

While we waited, we looked at some upside hedges that would do well if the market continued higher.  Just as we get downside protection when we're bullish – we use upside protection when we're bearish and I suggested taking 5% or 10% positions in aggressive upside plays to help balance a bearish portfolio against – well against exactly what happened in the past 7 days.  Our trade ideas were:  

  • 2 FAS Oct $105/115 bull call spread at $2, selling 1 BBY 2014 $18 puts for $3.25 for net .75, now $1.15 – up 53%
  • 2014 SHLD $32.50 puts sold for $7.50, now $6.40 – up 15% 
  • 6 EWJ Jan $9 calls at .53, selling 1 BBY 2014 $18 put at $3.25 for a net .07 credit, still net .07 credit – even 
  • TNA Oct $55/61 bull call spread at $2.50, selling Oct $42 puts for $1.90 for net .60, now $1.80 – up 200%

The BBY puts jumped over 20% yesterday, from below $3 to $3.75 and that killed two of our trades (and worse today after earnings!), that were up significantly in Friday's update (which is why we take quick gains like that off the table).  The good news is the EWJ play gives us a nice, new entry at the same net price so that one is still good and, of course, we are done with TNA after making 200% in a week and we'll find a fresh horse for that money.

Speaking of fresh horses – for our offsetting short puts today – let's take a look at our Twice in a Lifetime List, which were 16 blue-chip stocks we picked into the May market collapse that were approaching their 2009 panic lows.  

BAC, for example, was $6.97 at the time and our trade idea was to sell the 2014 $7 puts for $1.75 each for a net $5.25 entry.  BAC is now trading back at $8.15 and the 2014 $7 puts have dropped to $1.05 – up 40%.  CCJ 2014 $17 puts were sold for $3.30 and are already down to $1.75 for a nice 47% gain, CHK is no surprise to people who heard me banging the table on them and, at the time, they were trading at a ridiculous $13.83 and we were able to aggressively sell the 2014 $13 puts for a whopping $5 (isn't panic great?) and those puts are already down to $2.15 with the stock back at $19.40 (up 57%).  FTR is another one Members got sick of hearing me make bullish calls on and they were still $3.20 at the time (now $4.65) and the 2014 $3.50 puts (very aggressive sale) that sold for $1.30 are now .55 (up 54%).  

While the list was generally like shooting fish in a barrel for our Members – the above trades are what we call "tired horses" that have already had a good run.  We can ride them the next 17 months to the finish but, when you make 50% in 3 months and then have to wait 17 months for the next 50% – the thrill is kind of gone – don't you think?  

Fortunately, we did have a few stocks on our list that are still pretty cheap but, the big question is – do we still believe in them?  

  • The ALU ($1.20) 2014 $2 puts are still $1 and we do like ALU long-term and this is a net $1 entry on the stock.
  • BTU ($22.82) 2014 $20 puts are now $3.60 (up just 12% from our $4.10 entry) and, if you believe in China (or the Koch brothers), then coal still has a future.  
  • HPQ ($20.10) is down about 10% from our original pick ($22.04, now $20.20) and the 2014 $23 puts are one of two losers on our list as they have gone up from $5 to $5.65 (down 13%).  While I still like that target for HPQ, now you can sell the 2014 $20 puts for $3.80 and that's net $16.20 vs net $17.35 on the other sale so it depends what you think you will be comfortable with as an entry if things go downhill.  
  • SVU ($2.30) is our other loser and our biggest with the 2014 $5 puts jumping from $1.85 to $3.10 (down 40%).  Our play was to roll them down to 2x the $3 puts at $1.50 for a net $2.12 entry on 2x with SVU now at $2.30 so no real tragedy and we do still like selling the 2014 $2.50 puts for $1.10 as that's a net $1.40 entry, which is a 39% discount to the current stock price.  
  • X ($22.66) 2014 $20 puts are up 20% from our $5 entry at $4 but gosh, I still like them!  Even better are the 2014 $18 puts at $3.10 for a net $14.90 entry if put to you, which is 34% below the current price.  

As we like to teach our Members, if you take your initial entries into stocks at 34% below the current price – you stand an excellent chance of staying ahead of the market AND you have a built-in cushion to fend off all but the worst market corrections.

BEFORE we talk about making money in a breakout rally – it's important to make it clear that I still do not believe in this rally at all.  IF we get stimulus, THEN I will believe for the 6-12 months it will last us but, until there is actual money on the table from the EU and the Fed – this "rally" is nothing but a house of cards that a breeze (or a negative statement) can blow right over.  In fact, this morning I sent out a special pre-market Alert to Members at 5:46 am where we decided to short the Futures on Oil (/CL) at $97, Gold (/YG) at $1,627 and the Nasdaq (/NQ) at 2,786 so those are aggressively short day-trades as we're not buying the morning pump job.  We got a quick dip but now we're waiting to see if those levels cross again (note Dave Fry's chart) – and we'd like to see the Dollar get back over 82.20 (now 82.10). 

SPY 5 MINUTEOur short-term portfolios are still very bearish and down 6% for the week as we hang on until that 3rd level finally breaks (and holds for a full day) while our long-term Income Portfolio remains very bullish.  Of course, to some extent, it's prudent to have a small, aggressive, short-term $25,000 Portfolio act more bearish when it's protecting a bullish $500,000 Portfolio that's poised bullish but most of our Income Portfolio positions are the same kind of long-term short puts as we had on our Twice in a Lifetime List and they don't need a whole lot of protection – just time to mature.  Now, for the upside trade ideas:  

  • FAS is still my favorite long.  Look how well our last FAS play did and all XLF did was move up .20.  We're looking for $16.50 on any kind of stimulus/bailout news and that's up 8.5% from here on XLF and that should pop FAS about 25%, from $96 to $120 and we can still pick up the Oct $107/117 bull call spread for $2.05 and offset 2 of those ($4.10) with the sale of one BBY 2014 $15 puts at $3.75 for a net .35 entry on $20 worth of spreads.  That's a potential upside of 5,614% if we hit our targets – that can certainly take the sting out of losing a few bearish bets!  
  • I said last week I did not like gold but silver had possibilities.  AGQ is is an ultra-ETF that tracks silver at 2x the move and silver may beak over $29 and has a clear shot to $31 if it does and that's going to be good enough to take AGQ up to $45 but we're betting on QE and a big rally so how about the Oct $38/45 bull call spread at $3.10, which can be nicely offset by another materials position in BTU, selling the 2014 $20 puts for $3.60, which is a net .50 credit on the $8 spread for a very nice 4,100% return if both sides hit their target and the worst case here is we end up owning BTU at net $19.50, which is another 14% off from here.  
  • If we are going to break up from here, the Dow has a bit of catching up to do.  DIA follows the Dow and is now $132.38 and the Oct $135 calls are just $1.35 and we can buy 3 of those for $4.05 and sell just one (per unit) HPQ (a Dow component) 2014 $20 put for $3.80 for a net .25 with no limit to the upside Dr. Bernanke and Mr. Draghi can give us in September.  Dow 13,600 is only 2% away and, while 13,600 seems ridiculously overvalued to us – that's just our brain talking and we'll have to stop listening to that long before we get that high….  A 5% move up in the Dow to 13,933 (so ridiculous to write that down!) would make those 3 calls worth about $12 on the net .25 investment so, if the HPQ puts also expire worthless, we're looking at a gain on cash of 4,800%.  

Don't forget, our goal on these trades is to make 300% and move on and if, like the last batch, we make over 100% in less than a week – that's also a good reason to take them off the table.  We are NOT bullish yet, these are hedges to our bearish positions but, like any good boy scouts – we do like to be prepared. 

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Phil
The coop event was anti disabled, didn't get out of the car, I left without food and have to return to get my propane tank. The good thing that happened is I had no idea about the primary election today. To try to rid of WY bad guys and girl I registered republican and voted against Christensen, a neighbor, Loomis, and Brasso. Those are American sell outs esp. Dr Brasso, a sell out doctor that should go to Jail with Romney and the Banksters. Don't worry I think a lot of democrates need to visit the gray bar hotel and check out the food!
Hope flip flips out when he sees what can be done while he doesn't vote.

ZO/STONEAX TOO FUNNY!

TLT/ Pharm and Phil – thanks for your responses.  I gotta stop taking 'risky' trades where I risk $4 to make $1!!  
I may simply wind down my credit spread early or keep very tight stops as I do not have a feel anymore about TLT trades and hedges do not seem to be working in current environment.  (Though I plan to strongly consider recommended trades and may enter one in next few days / week) 

At least a few are seeing the rotten Apple!. For those who believe they can fly get ready for a hard landing! One bad apple spoils the whole barrel. They may surprise me but the next thing they need to do is adapt to the rest of the world. If they do that sign me back up. Maybe I should try contacting Victor, he was a friend of Steve so he is most likely out now.

Pharmboy
You may have missed earlier 1.01 pm post about LLY puts.
"Are you still liking the LLY Sept 41 puts?"
Haven't seen you mention  them in a while.
Thanks

Have an hour with the doctor tomorrow AM. Hope he understands this time he can help me or get sued for malpractice. Maybe next year his plan is to become a politician? 18 hours notice doesn't help him after waiting for months to negotiate when the hospital aready admitted fault and offered a small amount.
Flip everyone is no good but no vote assures this will continue. We voters don't deserve that so please vote.

So much for the death cross on the NYSE! And now we are having a golden cross as the 50 DMA is crossing over the 200 DMA. Maybe they are reversed this year!

LLY/zip – apologies, things have been crazy at work.  I like the Sept $41s, but they have been up and down. Take profits where you can, and put tight stops on those that move against you.  These have been in a range.  I am really liking the Oct/Sept $41 calendar spread for a whopping 30c debit.  I still think we get a sell off, but the push up may also be strong, so these will lose little as the front premium erodes (hence the tight stops).  So, in essence, do the latter rather than the former…hows that for decisiveness?

Vegas – If that calendar comes in that I note above, you buy me a drink, if not, I will have drinks in my room again for all to celebrate my loss together.  Of course, I have to announce the in and out of the trade…so tomorrow, I will put my order "in".  By coming in, it needs to make money…how much…well, if it pays for commissions (say $1/option), then we are good to go. 

I will probably have drinks anyway, but it is the challenge.  Where's LV?  I need to heckle him for a few drinks when I speak!

 

CRIS – buying more stock FWIW.  That is crazy low.

It Don't Take a Weatherman to Know Which Way the Wind Blows Dept.:  94L last night,  TD 9 today,  is declared Tropical Storm Isaac.  "…[a] majority of the models bring TS Isaac into SE Florida; some have it coming east of south florida and some to the west but either way it looks like South Florida will receive very bad weather next week."  Tonight's projections show it crossing Port au Prince on Hispaniola, Cuba and onto South Florida, its condition depending on whether it gets tangled up in the Dominican Republic's high mountains on the way.  For those pulling for a Republican Convention wipeout in Tampa, it is tough to get a hurricane up that far.
 
The weather has provoked economic discussion even on a hard-core weather blog, to wit, whether a direct hit could stimulate the Florida economy:  Krugman is quoted:  "…the broken windows fallacy ceases to be a fallacy: something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment. Indeed, in the absence of effective policy, that’s how recovery eventually happens: as Keynes put it, a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plant and equipment."
 
Sounds like wishful thinking, But Isaac seems to be developing quickly tonight, Puerto Rico's Governor has already canceled schools tomorrow.  Here's a look from the GOES Floater, updated every half-hour:  http://www.ssd.noaa.gov/PS/TROP/floaters/09L/flash-ft-long.html

Weather Follow up:  The best guess right now is that Isaac strengthens to a Cat 2 or 3 going up the Fla. coast towards Jacksonville, after running over Puerto Rico, Hispaniola and Cuba, with a possible landfall in Miami.  I'm in the path of it, but sheltered.

Phil- What about selling CLF Jan14 40 puts  for 985- seems a good resource bet ?

OLN – with all the ammo purchases the DHS, NOAA, and SSA are making, perhaps Olin should be on our buy list. of course, it would also be good to understand what do all these domestic agencies need with enough hollow point ammunition to shoot every american and then some? Or someone please tell me this is just "tea party paranoia."

Thanks Pharm. No apology required.
Just thought the first note might have gone unnoticed amid the politics, the Apple downswing and waiting for QE 3 which is now beginning to sound like a Beckett play 🙂
ESTRAGON: I can't go on like this.
VLADIMIR: That's what you think.

Hi Phil,
I have the following hedges (after a couple of rolls):
QQQ Sept 30 (Quarterly) x15 67 puts (cost basis $2.67), down about $2600.  This is covered by Weekly $68P, by about $0.27.  I will be "happy" to roll 68P forward if they expire itm..
TZA Sept 15C bought at x30 $1.67 (cost basis probably $3.27), down about $3000. No covers on this pos, looking to sell covers this week.
In last month My portfolio's long(er) term long positions have done well as market went up but I am want to 'keep' the long term positions (hence need the hedge) but hedges are going to trigger short term realized loss.
I will take some losses on the hedges. Is selling short term covers to reduce cost while retaining some coverage in case market drops strongly the correct strategy?  
Thanks in advance.

Japan’s exports in July hit a six-month low on falling demand from
Europe and China. Exports fell 8.1 per cent year-on-year, while
economists had on average been expecting only a 2.9 per cent drop.
(Reuters).

Fed minutes today @ 2:00pm

China's largest cotton-textile maker, Weiqiao Textile Cotton, has warned that consumption in the
world's largest cotton user may shrink 11 per cent this year as a
deteriorating economy hurts demand and causes a buildup in
commodities. “China now is facing a situation where everything from
coal to steel inventories are piling up,” said Zhang Hongxia the
company's chairman. (Bloomberg).

I was wondering ? If LEGITIMATE rape does not result in pregnancy, does FAKE rape?????

jacalynm – The answer to that question is best provided by a woman and it's obvious to most….excluding most republican men of course…..
 
🙁

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